Are Shares of Coinbase a Good Buy Under $250?
Coinbase (COIN) is down 32% since its IPO. The losses have intensified in recent days due to weakness in bitcoin. Is it time to buy the dip or is this the beginning of a bearish trend in cryptocurrencies?.
Coinbase (COIN) is generating plenty of hype following its IPO. COIN was priced at $328 on April 14. The stock has slid all the way down to $239 in a little more than a month.
Though COIN temporarily came back to life in the second week of May, it has been sliding since. The famed fund manager, Cathie Wood, of ARK Investment Management, invested nearly $600 million in COIN when it first hit the market. However, this has been a bad year for Cathie as her ARK ETFs and COIN splurge have underperformed across the initial five months of 2021.
Now that COIN has dipped below $250, it is fair to ask if the stock is worthy of an investment. Let’s take a look at whether this is the right time to buy COIN.
Cryptocurrencies are all the rage these days as most governments outside of China seem to have given crypto developers the green light to innovate. The American dollar and other currencies may eventually be replaced with a cryptocurrency such as Bitcoin.
COIN’s role in the context of crypto is that of an exchange. COIN is the largest crypto exchange in the United States. A total of 50 unique digital assets are traded on COIN’s exchange.
COIN makes money through transaction fees triggered by the buying and selling of all sorts of different cryptocurrencies. In total, COIN has more than 56 million users across 100 countries. The company also serves 7,000 institutions. COIN has 115,000 partners. COIN's platform is highlighted by an intuitive user experience design that can be used with ease by those who are new to crypto as well as those who have been trading crypto for years. COIN revenue jumped 139% on a year over year basis in 2020, escalating beyond $1.14 billion.
COIN is currently operating in the black with more than $320 million of net income in the year gone by. COIN profitability is meaningful as the company lost $30 million in the preceding year. COIN bulls point to the fact that the company's growth ramped up in the first quarter of 2021, jumping to an impressive $1.8 billion, which represents a 9x jump from the $191 million raked in during the same quarter in the prior year. COIN's first-quarter revenue is up 300% compared to the fourth quarter of 2020.
The Analysts’ Take on COIN
The analysts believe COIN is underpriced at its current trading level of $239. The average target price for the stock is $418.62, representing more than 68% potential upside. If COIN reaches the highest analyst target price, it will have nearly tripled to $650. The lowest analyst target price for the stock is $250. A total of 12 analysts have issued recommendations for COIN. None of these analysts view COIN as a Sell or Strong Sell. Exactly five analysts consider COIN to be a Buy, four consider it a Hold, and three consider it a Strong Buy.
COIN According to the POWR Ratings
COIN is a POWR Ratings disappointment with a C overall grade, meaning it is a Hold. In terms of the POWR Ratings components, COIN has B grades in the Quality, Momentum, and Growth components. However, the stock has a C Sentiment grade. Click here to find out how COIN grades out in the Value and Stability components of the POWR Ratings.
Of the 125 publicly traded companies in the Software - Application space, COIN is ranked 40th. The Software - Application segment has a D POWR Rating grade. Investors who would like to find out more about the publicly traded companies in this segment can do so by clicking here.
Is COIN a Buy Below $250?
COIN is not a buy-in even though it has dipped below the $250 mark. Half of COIN's POWR Ratings components are graded at C or worse. Though COIN has a couple of B grades in the POWR Rating components, its overall POWR Rating is a C, meaning it is not a Buy. Rather, COIN is a Hold and likely will continue to be a Hold unless the entire crypto space gets a boost or the stock's price drops below $200. Savvy investors will sit this one out and wait for crypto to get the endorsement of more federal governments or wait for COIN to drop to an even more attractive price point.
COIN shares fell $24.50 (-10.25%) in premarket trading Wednesday. Year-to-date, COIN has declined -34.16%, versus a 9.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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