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
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:
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“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
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
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
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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