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Coinbase Shares Lag Industry: What Investors Should Know
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Shares of Coinbase Global Inc (COIN - Free Report) have lost 15.3% year to date against the industry’s increase of 7.2% and the Zacks S&P 500 composite’s increase of 13.2% in the said time frame.
The performance of COIN largely depends on market volatility, which, in turn, impacts trading volume. The highly volatile crypto market experienced a downturn recently. While Bitcoin, the largest cryptocurrency, lost nearly 4%, Ethereum, the second-largest cryptocurrency, lost about 6% at Friday’s close.
The recent job report released on Friday stated that the U.S. economy added 142,000 new jobs in August. Per a report published in Market Watch, economists polled by the Wall Street Journal had forecast an increase of 161,000 new jobs in August. A lower-than-expected number likely raised concern. All the major indices, the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite, declined at Friday’s close.
COIN Lags Industry and S&P
Image Source: Zacks Investment Research
Negative Analyst Sentiment
Five of the six analysts covering the stock have lowered estimates for 2024, and five of the eight analysts covering the stock have lowered their estimates for 2025 over the past 60 days.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 20% and 26% south, respectively, in the past 60 days.
While the consensus estimate for 2024 indicates an increase of 1,435% from the year-ago reported figure, the consensus estimate for 2025 indicates a 55.6% decline.
Factors Favoring COIN Stock
COIN is prioritizing crypto utility as it envisions bringing on 1 billion or more people on crypto rail and is thus heavily investing in infrastructure and foundational platforms like Layer 2s, Base and Stablecoins. COIN partnered with Stripe to enhance the global adoption of crypto.
Strengthening banking connections, locking of new licenses and expansion of tailor-made product ranges to meet unique customer preferences are aiding COIN in scaling new heights.
Coinbase is increasing its market share in the U.S. spot and derivatives markets, expanding its product portfolio and penetrating the international market. Growth in stablecoins should fuel the top line of this company.
Unfavorable Return on Equity
COIN’s return on equity in the trailing 12 months was 13.9%, lower than the industry average of 46.9%, reflecting inefficiency in utilizing shareholders’ funds.
The return on invested capital in the trailing 12 months was 7.1%, which compared unfavorably with the industry average of 20.9%, reflecting the insurer’s inefficiency in utilizing funds to generate income.
COIN’s Valuation
Valuation remains expensive at the current level. It is currently trading at a price-to-earnings multiple of 48.12, higher than the industry average of 22.33.
Shares of Robinhood Markets (HOOD - Free Report) and Interactive Brokers Group, Inc. (IBKR - Free Report) , two other crypto-oriented stocks, are also trading at a multiple higher than the industry average.
To Conclude
This crypto giant’s efforts to accelerate growth, increase market share in spot trading on consumer and institutional trading platforms and improve trading experience along with continued innovation and cost-control initiatives poise it well for growth. Though the crypto market is witnessing a downturn, an interest rate cut by the Fed will spike volatility and, in turn, benefit the crypto market.
However, a premium valuation and weak return on capital keep us cautious.
Investors who own this Zacks Rank #3 (Hold) stock should retain it, while others may wait for a better entry point.
Image: Shutterstock
Coinbase Shares Lag Industry: What Investors Should Know
Shares of Coinbase Global Inc (COIN - Free Report) have lost 15.3% year to date against the industry’s increase of 7.2% and the Zacks S&P 500 composite’s increase of 13.2% in the said time frame.
The performance of COIN largely depends on market volatility, which, in turn, impacts trading volume. The highly volatile crypto market experienced a downturn recently. While Bitcoin, the largest cryptocurrency, lost nearly 4%, Ethereum, the second-largest cryptocurrency, lost about 6% at Friday’s close.
The recent job report released on Friday stated that the U.S. economy added 142,000 new jobs in August. Per a report published in Market Watch, economists polled by the Wall Street Journal had forecast an increase of 161,000 new jobs in August. A lower-than-expected number likely raised concern. All the major indices, the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite, declined at Friday’s close.
COIN Lags Industry and S&P
Image Source: Zacks Investment Research
Negative Analyst Sentiment
Five of the six analysts covering the stock have lowered estimates for 2024, and five of the eight analysts covering the stock have lowered their estimates for 2025 over the past 60 days.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 20% and 26% south, respectively, in the past 60 days.
While the consensus estimate for 2024 indicates an increase of 1,435% from the year-ago reported figure, the consensus estimate for 2025 indicates a 55.6% decline.
Factors Favoring COIN Stock
COIN is prioritizing crypto utility as it envisions bringing on 1 billion or more people on crypto rail and is thus heavily investing in infrastructure and foundational platforms like Layer 2s, Base and Stablecoins. COIN partnered with Stripe to enhance the global adoption of crypto.
Strengthening banking connections, locking of new licenses and expansion of tailor-made product ranges to meet unique customer preferences are aiding COIN in scaling new heights.
Coinbase is increasing its market share in the U.S. spot and derivatives markets, expanding its product portfolio and penetrating the international market. Growth in stablecoins should fuel the top line of this company.
Unfavorable Return on Equity
COIN’s return on equity in the trailing 12 months was 13.9%, lower than the industry average of 46.9%, reflecting inefficiency in utilizing shareholders’ funds.
The return on invested capital in the trailing 12 months was 7.1%, which compared unfavorably with the industry average of 20.9%, reflecting the insurer’s inefficiency in utilizing funds to generate income.
COIN’s Valuation
Valuation remains expensive at the current level. It is currently trading at a price-to-earnings multiple of 48.12, higher than the industry average of 22.33.
Shares of Robinhood Markets (HOOD - Free Report) and Interactive Brokers Group, Inc. (IBKR - Free Report) , two other crypto-oriented stocks, are also trading at a multiple higher than the industry average.
To Conclude
This crypto giant’s efforts to accelerate growth, increase market share in spot trading on consumer and institutional trading platforms and improve trading experience along with continued innovation and cost-control initiatives poise it well for growth. Though the crypto market is witnessing a downturn, an interest rate cut by the Fed will spike volatility and, in turn, benefit the crypto market.
However, a premium valuation and weak return on capital keep us cautious.
Investors who own this Zacks Rank #3 (Hold) stock should retain it, while others may wait for a better entry point.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.