Is This a Turning Point for COIN?

Shares of cryptocurrency exchange Coinbase Global rose 14.34% during regular trading hours to a price of $75.27, making it our mover of the day. COIN outpaced the S&P500 and Nasdaq 100 composite indices by 13.7% and 12.8% respectively, on a heavy day of trading with 33,133,752 trades compared to its average of 14,632,142.

After a precipitous fall from its heights last November, prices of bitcoin appear to be stabilizing on the apparent belief that the bottom is in -- both for cryptocurrencies and more traditional asset classes such as equities. As an exchange for cryptocurrencies and NFTs (non fungible tokens), some investors may see shares of Coinbase as relatively safe a proxy investment into the cryptocurrency sphere, which is notoriously fractured and volatile.

COIN’s management is doing its part in supporting the narrative. In a July 20 blog post the company announced it didn’t have any exposure to bankrupt crypto firms Three Arrows Capital (3AC), Celsius, and Voyager. According to the post, Coinbase holds its customers’ funds 1:1, meaning that it does not leverage the money it holds on behalf of customers, and that all of their funds are always available for withdrawal.

This practice is in stark contrast to traditional banks, who use customer deposits as collateral for investment and lending activities, sometimes at extreme leverage ratios. This means that if all customers of a given bank decided to withdraw their money at the same time, the bank would almost certainly not be able to meet this demand. In the United States, the federal government insures most deposits up to $250,000 to address this exact scenario.

Unlike its customers, investors in Coinbase have experienced enormous losses in recent months. COIN its shares are down 71.5% -- underperforming the S&P 500 by 61.8%. But some investors may see an opportunity here, as COIN's 12 month trailing Price to Earnings (PE) ratio is 7.7, which is much lower than the S&P 500’s current average PE ratio of 15.97. At $75.27 per share, the company is trading 35% below its average target price of $117.27. The average analyst rating for the stock is BUY.

Staying abreast of the market is a full time job -- and most investors simply don't have the time to keep track of it all. At Market Inference, we help you sift through the noise to gain knowledge and perspective as an investor. subscribe to our free newsletter today!

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.