Zacks Rank #2 (Buy) Stock Coinbase Global (coin, The largest and most popular cryptocurrency exchange in the US. The platform allows users to buy, sell, and store cryptocurrencies like Bitcoin, Ethereum, and Ripple.
Scary but improving earnings, surprising history
Coinbase went public in 2021 and has an earnings history of ten quarters. Although COIN’s earnings history is brief, it still paints a mixed but rosy picture. COIN has missed the Zacks Consensus Estimate in seven out of eleven quarters. However, the last three quarters have been solid and have delivered double-digit EPS surprises in each quarter.
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SEC lawsuit
The biggest crisis surrounding Coinbase is its ongoing battle with the US Securities and Exchange Commission. In June, the SEC accused Coinbase of operating the crypto asset trading platform as an unregistered securities exchange. Despite the obvious uncertainty created by the lawsuit for investors, Coinbase shares are much higher than they were when the SEC lawsuit was filed on June 6. The crypto industry’s numerous recent legal victories are likely to boost investor confidence. The key takeaway for investors is how resilient the price action has been in the face of the lawsuit.
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forward guidance
Coinbase is very likely to report a loss this quarter. However, Wall Street is visionary. Watch to see if Coinbase’s positive earnings trajectory is expected to continue.
bitcoin halving
The next Bitcoin halving will occur in the first half of 2024. When a halving occurs, the reward for mining new blocks is halved, making it more challenging for miners to earn net Bitcoins. Historically, this phenomenon has caused scarcity to increase and the value of Bitcoin to increase as supply decreased. Since Coinbase’s business is deeply tied to the world’s most popular cryptocurrency, the halving is a potential bullish catalyst for COIN shares.
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Image source: CoinTelegraph
Institutional Adoption Comment: Slowly, then all at once
For most of its history, small retail investors have comprised the majority of investments in the crypto industry. However, Bitcoin has stood the test of time and is attracting the attention of the world’s largest asset managers black Rock (blk, If the Bitcoin ETF is approved (I expect it to be), Coinbase will benefit dramatically as it is the listed exchange for the majority of Bitcoin ETF filings. Additionally, COIN CEO Brian Armstrong revealed in an interview that sovereign wealth funds with deep pockets have begun allocating assets to crypto. Although the adoption process is already underway, the doors will open if the crypto industry gets the long-awaited regulatory clarity from regulators.
Coinbase is a cash cow
Value investing veteran Seth Klarman shocked Wall Street by investing in Coinbase. Although Klarman is far from a crypto supporter, he explained that he bought the shares because “Coinbase has $5 billion in cash, less debt and is doing some smart things.” Although Coinbase is losing money, its growing cash reserves should attract new investment dollars from investors who would otherwise avoid the crypto industry.
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Bitcoin is being used as an inflation-fighting tool
Bitcoin is being used in the real world to prevent inflation. evidence? Bitcoin reached new highs in three countries plagued by inflation, including Nigeria, Turkey, and of course Argentina. The evidence is clear: the world’s citizens are attracted to Bitcoin because of its inflation-resistant protocol (there will only ever be 21 million coins, while countries around the world print money endlessly). Year-to-date, Bitcoin is 351% stronger against the Argentine peso.
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Source: finance.yahoo.com
