Coinbase Global, Inc. (COIN) provides financial infrastructure and technology for the crypto-economy in the United States and beyond. The company offers primary financial accounts to retailers in the crypto-economy, a marketplace with a pool of liquidity for institutions to transact in crypto assets, and technology and services for ecosystem partners.

Its shares are down 73.9% over the past year and 76.7% year-to-date to close yesterday’s trading session at $58.88. In addition, the stock is currently trading 84% below its 52-week high of $368.90, which it hit on November 09, 2022.

The pullback is rippling across the crypto industry, with COIN announcing intentions to slash nearly one in every five roles. Last week, the company said it would lay off around 18% of its personnel, resulting in the loss of approximately 1,100 jobs. The company’s CEO Brian Armstrong said, “We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period.”

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

Crypto Meltdown

Global crypto markets, which peaked at $2.9 trillion last year, have lost roughly $1 trillion in value in the last two months. Surging inflation, aggressive signaling on rate hikes by the Federal Reserve and other central banks, rising bond yields, and a strengthening U.S. dollar have all combined to put downward pressure on crypto assets, despite the wider adoption of bitcoin into national currencies by various governments around the world.

Inadequate Financials

COIN’s total revenue decreased 35.2% year-over-year to $1.16 billion for the first quarter ended March 31, 2022. Its operating loss came in at $554.46 million, compared to an operating income of $987.71 million in the prior-year period. The company reported a net loss of $429.66 million compared to a net income of $387.72 million in the first quarter of 2021. Its loss per share amounted to $1.98. In addition, its cash and cash equivalents declined 14.1% for the three months ended March 31, 2022, to $6.12 billion.

Poor Growth Prospects

Street expects COIN’s revenues and EPS to decline 46.4% and 149.9% year-over-year to $4.2 billion and ($7.24), respectively, in fiscal 2022. In addition, COIN’s EPS is expected to decrease 133.6% in the current quarter and 149.9% next quarter.

POWR Ratings Reflect Bleak Outlook

COIN has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. COIN has an F for Growth and Sentiment. The company’s expected earnings and revenue declines are in sync with the Growth and Sentiment grades.

Of the 157 stocks in the F-rated Software – Application industry, COIN is ranked #127.

Beyond what I’ve stated above, you can view COIN ratings for Quality, Value, Momentum, and Stability here.

Bottom Line

Bitcoin plunged below $20,000 for the first time since 2020 as monetary policy tightening by several nations prompted a flight from risky assets. This has caused crypto-centric stocks like COIN to plummet. Analysts expect the company’s EPS to remain negative in the current and next years. Moreover, the stock is currently trading below its 50-day and 200-day moving averages of $88.61 and $202.21, respectively, indicating a downtrend. So, we think the stock is best avoided now.

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

While COIN has an overall D rating, one might want to consider its industry peers, Rimini Street Inc. (RMNI), Commvault Systems Inc. (CVLT), and American Software Inc. (AMSWA), which have an overall A (Strong Buy) rating.

COIN shares were trading at $60.41 per share on Friday afternoon, up $1.53 (+2.60%). Year-to-date, COIN has declined -76.06%, versus a -17.93% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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