COIN Stock Rallies 22% YTD But Valuation Is Expensive: How to Play

Shares of Coinbase Global COIN have gained 22.4% year to date, outperforming the industry, sector and the Zacks S&P 500 composite. 

COIN, a crypto leader, is poised to benefit from listing a broader range of crypto assets and tokenized equities, international expansion, strategic buyouts and increased volatility. Its efforts to be the industry’s “everything exchange” in the evolving U.S. crypto landscape, a favorable regulatory climate for digital assets in the United States, the President’s pro-crypto stance and policy actions like establishing a strategic Bitcoin reserve, as well as bipartisan progress in Congress on stablecoin, seem to favor Coinbase.

COIN shares are, however, trading 32% lower than their 52-week high of $444.65, indicating more upside for the stock. 

COIN vs Industry, Sector, S&P YTD

Shares of Robinhood Markets HOOD and Interactive Brokers Group, Inc. IBKR, both crypto-oriented companies, have gained 256.9% and 64.6% year to date, respectively.

Robinhood has evolved from a brokerage firm mainly trading in digital assets to a more mature and diversified entity, striving to widen its market and reach. Robinhood continues to diversify its product base to acquire new clients and gain market share. 

Interactive Brokers is known for its advanced electronic trading platforms and global market access. The company leverages proprietary systems to automate nearly every aspect of the brokerage process — from trade execution and risk management to compliance and customer onboarding. This enables Interactive Brokers to operate with minimal human intervention and significantly lower costs than traditional brokers.

Coming back to Coinbase, should you consider adding the stock to your portfolio based on positive price movements only? Let’s delve deeper. 

The Case for COIN Stock

This largest cryptocurrency exchange platform in the United States by trading volume has been constantly working toward building itself to be the industry’s “everything exchange.” It has been building a compelling portfolio consisting of varied crypto assets. 

Recently, COIN launched an end-to-end token sales platform for both issuers and users. It allows investors to participate in new token launches before listing. Coinbase is also providing access for the retail community. Also, in its continued efforts to bring crypto and traditional banking closer in the global arena, COIN is introducing a new savings account that offers 3.75% AER variable interest in the United Kingdom. 

COIN stands to gain from increased volatility and rising prices in the crypto asset market.  The accelerating adoption of stablecoins is poised to further boost revenues. Coinbase stands to gain from strengthened banking relationships, new licenses and the introduction of customized products for diverse customer segments. With a clear growth strategy, the company is increasing its market share in both the U.S. spot and derivatives markets, broadening its product suite and expanding its presence globally. 

COIN is expanding its subscriptions and services revenues to diversify income and enhance business resilience, with USDC-related stablecoin income becoming an increasingly important driver. Over the last two years, it noted that MDUs holding USDC doubled, and the average balance of USDC per holder has tripled.

A strong liquidity position enables continued strategic investments aimed at enhancing offerings and driving sustainable growth.

Coinbase is a fundamentally strong company with solid liquidity and decreasing debt over the past several quarters. Its total debt capital ratio has been improving. However, Coinbase priced $2.6 billion convertible notes, which increases concerns about dilution and financial leverage.

COIN’s Favorable Return on Capital

COIN’s return on equity (ROE) in the trailing 12 months was 15.7%, better than the industry average of 14.9%, indicating that it is efficiently generating profit from shareholders' equity.

The return on invested capital in the trailing 12 months was 10.6%, which compared favorably with the industry average of 6.2%. The company has raised its capital investment significantly, reflecting its efficiency in utilizing funds to generate income.

Optimistic Analyst Sentiment for COIN

The Zacks Consensus Estimate for 2025 and 2026 earnings has moved 13.3% and 0.7% north, respectively, in the past 30 days.

The Zacks Consensus Estimate for 2025 and 2026 revenues implies an 11.3% and a 13.1% year-over-year increase, respectively. While the consensus estimate for 2025 earnings suggests a 4.3% increase, the same for 2026 indicates a 26% year-over-year decrease.

COIN Shares Are Expensive

COIN shares are trading at a premium to the industry. Its 12-month forward price-to-earnings of 49.85X is much higher than the industry average of 23.76X. It is also trading higher than its five-year median of 27.63

Its Value Score of F suggests that the stock is not so cheap and indicates a stretched valuation at this moment.

How to Play COIN Stock

Coinbase’s efforts to accelerate growth in the crypto market, increase market share in spot trading on consumer and institutional trading platforms and improve trading experience, along with continued innovation, should help it accelerate growth.  Higher average USDC on-platform balances, USDC market capitalization and higher average crypto asset prices point to stability in the revenue stream going forward.

However, crypto asset price risk and lower volatility could adversely impact Coinbase’s operating results. A decline in the market price of Ethereum, Bitcoin and other crypto assets could hurt earnings, the carrying value of crypto assets and future cash flows. This may also affect liquidity and the company’s ability to meet ongoing obligations.

Given a premium valuation, projected declines in earnings and a VGM Score of F, we stay cautious on this Zacks Rank #3 (Hold) stock presently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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