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COIN Stock Slips Below 50-Day SMA: What Should You Do Now?
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Coinbase Global Inc. (COIN - Free Report) has been trading below its 50-day simple moving average (SMA), signaling a short-term bearish trend. The stock closed at $268.15 as of Dec 23, 2024, down 23% from its 52-week high of $349.75.
The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as this is the first marker of an uptrend or downtrend.
COIN, America's largest registered crypto exchange, has a market capitalization of $67.1 billion. The average volume of shares traded in the last three months was 13.7 million.
Image Source: Zacks Investment Research
However, shares of COIN have lost 14.7% in a month, worse than the industry’s decrease of 1.4%, the sector’s decline of 5.3% and the Zacks S&P 500 composite’s decline of 0.3% in the same time frame.
COIN vs Industry, Sector & S&P 500 in a Month
Image Source: Zacks Investment Research
COIN is expected to benefit from Trump’s second-term electoral win, given a pro-crypto environment and easing regulatory control. However, its past month price performance does not reflect this. Bitcoin, the largest cryptocurrency, has also lost 4% in a month’s time.
Mixed Analyst Sentiment for COIN
The Zacks Consensus Estimate for 2024 and 2025 has moved 3.3% and 19.1% higher, respectively, in the past 30 days.
Though the Zacks Consensus Estimate for 2024 earnings implies a 1356.8% year-over-year increase, the same for 2025 suggests a 40% decrease.
Factors Favoring COIN Stock
COIN provides financial infrastructure and technology for the crypto economy in the United States and internationally. America's largest registered crypto exchange is set to benefit from higher crypto asset volatility and crypto asset prices. Increasing regulatory clarity acts as a catalyst for Coinbase and the broader crypto economy.
Strengthening banking connections, new licenses and the expansion of tailor-made product ranges to meet unique customer preferences are helping COIN scale heights.
Coinbase stays focused on growth by increasing its market share in the U.S. spot and derivatives markets and expanding its product portfolio and the international market. This apart, growth in stablecoins should also fuel the company’s top line.
COIN has been prioritizing crypto utility. It envisions bringing 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.
In the fourth quarter of 2024, Coinbase expects technology and development and general and administrative expenses to be in the range of $690-$730 million. Additionally, the company expects sales and marketing to be between $170 million and $220 million, driven by higher on-platform USDC balances and higher brand spend.
Focus on shifting to a subscription-based model enabled COIN to maintain positive EBITDA for the last six consecutive quarters. Its liquidity supports strategic investment in growth initiatives and expands its service offerings.
Unfavorable Return on Capital
COIN’s return on equity in the trailing 12 months was 14.8%, lower than the industry average of 48.2%, reflecting inefficiency in utilizing shareholders’ funds.
Image Source: Zacks Investment Research
The return on invested capital in the trailing 12 months was 7.6%, which compared unfavorably with the industry average of 21.4%. This reflects the insurer’s inefficiency in utilizing funds to generate income.
Image Source: Zacks Investment Research
Average Target Price for COIN Suggests a Downside
Based on short-term price targets offered by 22 analysts, the Zacks average price target is $289.77 per share. The average suggests a potential 4% upside from Monday’s closing price.
Image Source: Zacks Investment Research
Expensive Valuation
Coinbase shares are trading at a premium to the Zacks Financial Transaction Service Market. Its 12-month forward price-to-earnings of 81.75X is much higher than the industry average of 25.27X, the broader sector’s 25.64X and the Zacks S&P 500 composite’s 22.38X.
Its Value Score of F suggests that the stock is not so cheap and indicates a stretched valuation at this moment.
Image Source: Zacks Investment Research
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.
Parting Thoughts on COIN Stock
The inherent volatility in crypto prices exposes COIN to operational risks. The failure of its foundational platforms also poses risks. Coinbase, the custodian of client assets, is also exposed to cyber threats.
Nonetheless, the company’s efforts to accelerate growth in the crypto market, increase market share in spot trading on consumer and institutional trading platforms and improve trading experience, along with continued innovation, should help it accelerate growth. Despite the price decline, analysts remain optimistic and the target price also reflects upside potential. These instill investor confidence.
Image: Shutterstock
COIN Stock Slips Below 50-Day SMA: What Should You Do Now?
Coinbase Global Inc. (COIN - Free Report) has been trading below its 50-day simple moving average (SMA), signaling a short-term bearish trend. The stock closed at $268.15 as of Dec 23, 2024, down 23% from its 52-week high of $349.75.
The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as this is the first marker of an uptrend or downtrend.
COIN, America's largest registered crypto exchange, has a market capitalization of $67.1 billion. The average volume of shares traded in the last three months was 13.7 million.
Image Source: Zacks Investment Research
However, shares of COIN have lost 14.7% in a month, worse than the industry’s decrease of 1.4%, the sector’s decline of 5.3% and the Zacks S&P 500 composite’s decline of 0.3% in the same time frame.
COIN vs Industry, Sector & S&P 500 in a Month
Image Source: Zacks Investment Research
COIN is expected to benefit from Trump’s second-term electoral win, given a pro-crypto environment and easing regulatory control. However, its past month price performance does not reflect this. Bitcoin, the largest cryptocurrency, has also lost 4% in a month’s time.
Mixed Analyst Sentiment for COIN
The Zacks Consensus Estimate for 2024 and 2025 has moved 3.3% and 19.1% higher, respectively, in the past 30 days.
Though the Zacks Consensus Estimate for 2024 earnings implies a 1356.8% year-over-year increase, the same for 2025 suggests a 40% decrease.
Factors Favoring COIN Stock
COIN provides financial infrastructure and technology for the crypto economy in the United States and internationally. America's largest registered crypto exchange is set to benefit from higher crypto asset volatility and crypto asset prices. Increasing regulatory clarity acts as a catalyst for Coinbase and the broader crypto economy.
Strengthening banking connections, new licenses and the expansion of tailor-made product ranges to meet unique customer preferences are helping COIN scale heights.
Coinbase stays focused on growth by increasing its market share in the U.S. spot and derivatives markets and expanding its product portfolio and the international market. This apart, growth in stablecoins should also fuel the company’s top line.
COIN has been prioritizing crypto utility. It envisions bringing 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.
In the fourth quarter of 2024, Coinbase expects technology and development and general and administrative expenses to be in the range of $690-$730 million. Additionally, the company expects sales and marketing to be between $170 million and $220 million, driven by higher on-platform USDC balances and higher brand spend.
Focus on shifting to a subscription-based model enabled COIN to maintain positive EBITDA for the last six consecutive quarters. Its liquidity supports strategic investment in growth initiatives and expands its service offerings.
Unfavorable Return on Capital
COIN’s return on equity in the trailing 12 months was 14.8%, lower than the industry average of 48.2%, reflecting inefficiency in utilizing shareholders’ funds.
Image Source: Zacks Investment Research
The return on invested capital in the trailing 12 months was 7.6%, which compared unfavorably with the industry average of 21.4%. This reflects the insurer’s inefficiency in utilizing funds to generate income.
Image Source: Zacks Investment Research
Average Target Price for COIN Suggests a Downside
Based on short-term price targets offered by 22 analysts, the Zacks average price target is $289.77 per share. The average suggests a potential 4% upside from Monday’s closing price.
Image Source: Zacks Investment Research
Expensive Valuation
Coinbase shares are trading at a premium to the Zacks Financial Transaction Service Market. Its 12-month forward price-to-earnings of 81.75X is much higher than the industry average of 25.27X, the broader sector’s 25.64X and the Zacks S&P 500 composite’s 22.38X.
Its Value Score of F suggests that the stock is not so cheap and indicates a stretched valuation at this moment.
Image Source: Zacks Investment Research
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.
Parting Thoughts on COIN Stock
The inherent volatility in crypto prices exposes COIN to operational risks. The failure of its foundational platforms also poses risks. Coinbase, the custodian of client assets, is also exposed to cyber threats.
Nonetheless, the company’s efforts to accelerate growth in the crypto market, increase market share in spot trading on consumer and institutional trading platforms and improve trading experience, along with continued innovation, should help it accelerate growth. Despite the price decline, analysts remain optimistic and the target price also reflects upside potential. These instill investor confidence.
Therefore, despite its premium valuation, it's time to take a position in this Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.