Coinbase Global, Inc. (COIN), in San Francisco, is the most prominent digital asset exchange in the United States. It primarily provides financial infrastructure and technology for the crypto economy. Over the past month, the stock has gained 37.6% in price to close yesterday’s trading session at $342.98. COIN shares are trading well above their 50-day and 200-day moving averages of $290.89 and $257.92, respectively.

Shares of COIN retreated initially after the company reported lower-than-expected revenue growth amid the volatility in the price of Bitcoin and other digital tokens last week. However, the stock rebounded soon thereafter. “The sentiment is overwhelmingly bullish, and it’s playing out in the fourth quarter—when fireworks usually happen,” said Natalia Radyushkin, the chief financial officer of crypto platform Unbanked.com.

COIN’s trading volume slumped nearly 30% sequentially to $327 billion in the third quarter, from $462 billion in the prior quarter. And analysts expect the stock to witness volatility in the coming weeks. On the other hand, given the growing popularity of crypto trading worldwide, and with businesses investing significantly into growing their crypto infrastructure, COIN’s long-term prospects look promising.

Click here  to check out our Cryptocurrency Industry Report for 2021

Here is what could shape COIN’s performance in the near term:

Stretched Valuation

In terms of non-GAAP forward P/E, COIN is currently trading at 25.17x, which is 112.9% higher than the 11.82 industry average. Also, its 9.72 forward EV/Sales ratio is 190.10% higher than the 3.35 industry average.

In addition, COIN’s forward Price/Sales is 183.8% higher than the 3.54x industry average, and its forward Price/Book is 1,013.8% higher than the 1.29x industry average.

Higher-than-Industry Profit Margins

COIN’s 100% gross profit margin is 58.6% higher than the 63.06% industry average, while its EBITDA 62.18% margin is 164.2% higher than the 23.54% industry average.

Moreover, COIN’s 68.20%, 16.69%, and 48.59% respective ROE, ROA, and ROT compare with the 12.84%, 1.35%, and 6.02% industry averages.

Top-Line Missed Consensus Estimates

COIN’s revenues increased 316% year-over-year to $1.31 billion in its fiscal third quarter, ended September 30, which missed the consensus estimate by 17%. Its operating income stood at $291.81 million, up 187.5% from the same period last year. Its net income grew 399.5% from its year-ago value to $406.10 million. The company’s EPS increased 604.3% year-over-year to $1.62.

POWR Ratings Reflect Uncertainty

COIN has an overall rating of C, translating to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of D for Value, which is consistent with its stretched valuation.

COIN has a C grade for Sentiment. This is justified because analysts expect the company’s EPS to decline 46.9% in the next quarter and 47.3% in the next year. However, EPS is expected to increase 66.6% per annum over the next five years.

Among the 162 stocks in the Software – Application industry, COIN is ranked #57.

Beyond what I have stated above, you can also view COIN’s grades for Quality, Growth, Momentum, and Stability here.

View the top-rated stocks in the Software – Application industry here.

Click here to check out our Software Industry Report for 2021

Bottom-Line

Even though COIN is expected to gain significantly in the long run, given the growing popularity of crypto trading worldwide, its near-term prospects look uncertain. Considering its lofty valuation and analysts’ expectations of volatility in the crypto market, COIN could witness a pullback. Also, it has a beta of 1.13, indicating high volatility. Thus, we think it could be wise to wait for the stock to stabilize before investing in it.

How Does Coinbase Global, Inc. (COIN) Stack Up Against its Peers?

While COIN has an overall POWR Rating of C, one might want to consider looking at its industry peers, Open Text Corporation (OTEX), American Software, Inc. (AMSWA), and Fair Isaac Corporation (FICO), which have an A (Strong Buy) rating.

Click here  to check out our Cryptocurrency Industry Report for 2021

COIN shares rose $4.14 (+1.21%) in premarket trading Monday. Year-to-date, COIN has gained 4.48%, versus a 26.20% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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