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In the context of surging cryptocurrency prices, should you buy or sell Coinbase stock?

on Aug 31, 2021
  • 90% of Coinbase revenue comes from trading and storage service fees
  • Exchange expects $223 billion assets on platform from 56 million verified users by year's end
  • In 2021, Coinbase’s earnings increased by 2,350% y/y

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With Bitcoin (BTC/USD) approaching $50,000 and Ethereum (ETH/USD) mirroring the trend, Coinbase Global has moved to the fore of the cryptocurrency industry. Should you buy or sell their stock after the much-hyped IPO? An analysis by Investor’s Business Daily sheds light on the answer.

Stock up by more than 70% on first day

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On April 14, Coinbase was listed on the Nasdaq at $250 a share. Its stock increased by almost 72% to 429.54 on that day before closing at 328.28, generating a valuation of $87.3 billion. In a note to clients, Wedbush analyst Dan Ives wrote:

“The Coinbase IPO is potentially a watershed event for the crypto industry and will be something the Street will be laser-focused on to gauge investor appetite. Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of Bitcoin and crypto for the coming years.”

90% of Coinbase revenue comes from trading and storage service fees

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The biggest U.S. cryptocurrency exchange lists about 50 cryptocurrency pairs for trading. While Bitcoin, the coin with the highest market cap, is up just 2% this year, Ethereum has more than doubled in this time. About 90% of the company’s revenue came from storage service and trading fees.

Company predicts 11.3% crypto asset market share by year’s end

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The exchange issued an outlook for the full 2021. They expect to have $223 billion assets on platform from 56 million verified users, corresponding to a crypto asset market share of 11.3%. Their Q1 results slightly missed the mark. While Wall Street expected Coinbase to earn $3.07 a share on revenue of $1.81 billion, the actual revenue was $1.801 billion at $3.05 a share. Q2 results were better with the exchange earning $6.42 a share on sales of $2.22 billion. In 2021, Coinbase’s earnings increased by 2,350% y/y.

Stock trading at almost 40% off post-IPO peaks

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Due to recent drops, the shares are not forming an IPO base anymore. Analysts suggest keeping an eye out for a new base to form. This would be a reason to buy.

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