Coinbase Experiences Surging Stock Growth Amidst Bitcoin’s Volatility
Despite Bitcoin’s price falling below $100,000, it has surged over +120% in 2024. This remarkable gain has fueled a significant increase in the stock of Coinbase Global COIN, which has risen by +80% year to date.
As the largest cryptocurrency exchange in the United States, many investors may see Coinbase’s stock as an attractive buy-the-dip opportunity, particularly with COIN down -9% during Monday’s trading.
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Strong Financial Turnaround for Coinbase
Thanks to the Bitcoin surge and growing interest in cryptocurrency, Coinbase’s financial performance has greatly improved. Recently, Coinbase reported Q3 results showing a 100% jump in quarterly sales to $1.2 billion, up from $674.15 million for the same period last year.
Crucially, Coinbase’s Q3 earnings per share (EPS) reached $0.62, translating to a net income of $75 million. This is a significant turnaround from a loss of $2 million or -$0.01 per share a year before, marking the fourth consecutive quarter of positive net income.
Additionally, Coinbase has surpassed the Zacks EPS Consensus for seven consecutive quarters, boasting an impressive average earnings surprise of 341.36% over its last four quarterly reports.
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Sales Projections and EPS Outlook
According to co-founder and CEO Brian Armstrong, driving revenue is Coinbase’s primary goal. The company is pivoting away from unpredictable transaction-based revenues to focus on subscription and service revenues.
Total sales for Coinbase are projected to reach $5.61 billion in fiscal 2024, which marks an 80% increase from $3.11 billion in the previous year. Following this growth, FY25 sales are expected to decrease slightly by -2% to $5.48 billion.
In terms of earnings, analysts expect annual EPS to soar to $5.39 in 2024 compared to $0.37 in 2023. EPS for FY25 is expected to dip to $3.15. Notably, there has been a significant increase in earnings estimate revisions recently, moving from estimates of $1.87 per share just 60 days ago, with FY24 EPS estimates rising by 4% during this time.
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Focus on Diversification and Regulatory Environment
Beyond revenue growth, Coinbase is emphasizing improving the utility of cryptocurrencies and fostering regulatory clarity. The company aims to enhance the economic freedom blockchain technology brings to everyday life and innovation in finance.
Key initiatives include developing digital wallets and payment solutions to make cryptocurrency more accessible. The rally in Coinbase’s stock and Bitcoin has been further supported by the belief that President-elect Donald Trump favors cryptocurrencies. Trump has promised to establish a welcoming regulatory environment for cryptocurrencies, which could support Coinbase’s initiatives.
Financial Health and Valuation
With a forward earnings multiple of 67.3X, Coinbase’s stock is trading at a premium compared to the S&P 500, albeit lower than competitor Robinhood Financials’ (HOOD) 54.4X. Positive revisions in earnings estimates are justifying this premium, alongside a stronger balance sheet.
As of Q3 2024, Coinbase’s cash and equivalents grew to $8.62 billion from $5.52 billion in the previous year’s quarter. The total assets of Coinbase currently stand at $290.55 billion, outpacing total liabilities of $281.83 billion.
Image Source: Zacks Investment Research
Final Thoughts
With the growing optimism surrounding Bitcoin and other cryptocurrencies, Coinbase certainly appears poised for further success. As COIN has been added to the Zacks Rank #1 (Strong Buy) list, it may emerge as a compelling investment opportunity for 2024 and beyond.
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