Despite trading some 50% below its all-time high, there are plenty of reasons to expect shares of Coinbase Global (COIN) to bounce back in 2024. When factoring the 17% decline over the past thirty days, COIN stock has fallen some 24% year to date, compared to 4.5% rise in the S&P 500 index.
However, Coinbase's stock performance does not tell the entire story. Over the past year, the shares have risen 92%, including 50% gains in six months. Much of the volatility in Coinbase's stock has been tied to the price of Bitcoin, which has swung wildly leading up to the SEC granting approval to Grayscale Investment's application to convert its Bitcoin fund into an ETF, thus allowing U.S. investors to easily buy Bitcoin.
The company, which generates its revenue via transaction fees from customers buying and selling cryptocurrencies like Bitcoin, will report fourth quarter fiscal 2024 earnings results after the closing bell Tuesday. Among others, the SEC also approved applications from BlackRock and Ark Invest, which brings in new funds offering lower fees than Grayscale. These approvals bode well for Coinbase as it can potentially bring another revenue stream.
The company’s commitment to regulatory compliance and transparency now more than ever positions Coinbase as leading entity for institutional investors. All told, Coinbase’s management has done a solid job diversifying the business, transitioning the company’s crypto exchange into a full-fledged financial platform. Assuming the company can deliver a top- and bottom-line beat on Thursday, along with confident guidance, Coinbase could set itself up for having a banner year in 2024.
In the three months that ended January, Wall Street analysts expects the Wilmington, DE-based company to earn 2 cents per share on revenue of $731.9 million. This compares to the year-ago quarter loss of $2.46 per share on revenue of $629.11 million. For the full year, the loss is projected to be $1.09 per share, while full year revenue of $2.96 billion would decline 5.7% year over year.
The biggest shift Coinbase stands to benefit from is the fact that spot Bitcoin ETFs are finally here, which not only will make cryptos more mainstream, it will make it considerably easier for investors to legally buy and sell Bitcoin. There’s also the aspect of no longer needing a crypto wallet and understanding technical nuances such as private keys to Bitcoin. The availability of spot Bitcoin ETFs now makes it a non-technical endeavor.
What’s more, with the backing and approval of the SEC, institutional investors are now more likely to adopt cryptocurrency as a legitimate asset without the associated stigma and criticism from the main street. In that regard, Coinbase, which has planted itself at the forefront of the cryptocurrency industry to become largest U.S. cryptocurrency exchange, now becomes more appealing as an institutional investment given its efforts at offshore expansion aimed at increasing its user base.
As it stands, investors who are bullish on crypto now have plenty of reasons to be optimistic about the future for this asset class. In the most recent quarter, the company beat on both the top and bottom lines, reporting Q3 revenue of $674.15 million which rose 14.2% year over year, beating estimates by $22.3 million, while the Q3 loss of 1 cent per share beat by 53 cents. The company also issued upbeat guidance which helped the stock rise modestly.
All told, with such strong brand recognition and a sizable ecosystem, Coinbase has the scale to achieve its growth objectives. The company on Thursday can change the recent bearish perception by delivering a top and bottom line beat, along with outlining its path towards sustainable profits.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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