Coinbase (COIN) has become a popular option for many crypto investors. This crypto exchange has managed to become a top choice for those seeking publicly traded exposure to the crypto sector today.
However, since Coinbase’s IPO, some significant volatility has ensued. The company’s IPO price of $250 per share was quickly eviscerated by investor interest. On the first day of trading, COIN stock surged to $429.54 at its peak, before closing the day at $328.28.
However, since then, shares of COIN stock have steadily declined. Today, investors can pick up shares of Coinbase for roughly the company’s IPO price. (See COIN stock charts on TipRanks)
For the largest cryptocurrency exchange in the U.S., perhaps there’s some real value to be had with COIN stock right now. After all, cryptocurrency volumes are surging, alongside interest in this sector. More than 50 cryptocurrencies are available to be traded on Coinbase, covering most of the popular and highly traded tokens.
There’s certainly reason to believe Coinbase’s transaction fee-driven business model is poised for long-term success. Surging crypto prices are bullish for interest in this sector, which could drive valuation increases over time. Right now, I remain on neutral with respect to Coinbase.
COIN’s Huge Earnings Potential
Ahead of its debut, COIN presented its Q1 estimates on April 6. The company also issued an outlook for Fiscal Year 2021.
In May, the company issued Q1 earnings that slightly missed Wall Street estimates. It showed total revenue of $1.8 billion, with earnings per share of $3.05. However, Wall Street expected the company to earn $1.81 billion, with EPS of $3.07.
Still, COIN earnings soared 2,350%, and sales reached 845% compared to the previous fiscal year.
This past quarter, Coinbase’s earnings accelerated higher. The company showed earnings of $6.42 per share on sales of $2.2 billion. However, Coinbase projected slightly lower transaction volumes for Q3, leading to more selling pressure for this hyper-growth stock.
Given these mixed bags of results, investors may not know where to stand on COIN stock. Here are a few other factors to consider.
Rebound in Hash Rate Signals Continued Growth?
A few months ago, the entire crypto industry was in flux over a high-profile crackdown on cryptocurrency miners by the Chinese government.
Given China’s importance to global cryptocurrency mining operations (around two-thirds of the world’s Bitcoin mining capacity comes out of China), this was a big deal. The global hash rate got cut in half following this announcement, in just two-and-a-half weeks. Hash rate measures the computing power used in crypto mining processes.
Accordingly, this sharp volatility renewed concerns about China’s importance to stabilizing crypto prices. Concerns from prominent Bitcoin players that the crackdown could intensify drove Bitcoin prices, and by extension, those of crypto exchanges such as Coinbase, lower.
However, a recovery in the global hash rate has sparked renewed fervor in the cryptocurrency space. Investors seem to feel more confident than ever that the growth cryptocurrencies have seen thus far can be continued.
That said, many remain on the fence during this volatile time.
Wall Street’s Take on COIN Stock
As per TipRanks’ analysts rating consensus, COIN stock is a Moderate buy. Out of 15 ratings, there are 11 Buy recommendations, three Hold recommendations, and one Sell recommendation.
The average COIN price target is $350.17. The average price target lies between a high of $500 per share, and a low of $220 per share.
Coinbase has done an impressive job of allowing new cryptocurrencies to trade on its platform. An improved outlook stemming from stabilization in the crypto mining sector, and continued interest in cryptocurrencies, makes Coinbase an intriguing stock right now.
However, COIN stock has underperformed of late. There are concerns about this cryptocurrency exchange’s cash balance, as well as its long-term outlook, should a bear market take hold in crypto.
Right now, everything’s moving along fine. But the winds can change quickly. Investors should be prepared for anything with COIN stock.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article
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