COIN Falls 30% YTD: Time to Buy the Stock Despite Expensive Valuation?

Shares of Coinbase Global Inc. COIN have lost 29.5% year to date compared with the industry’s decline of 17.5%, the sector’s drop of 5.3% and the Zacks S&P 500 composite’s decline of 10.6%. 

COIN, the crypto leader, is poised to benefit from listing a broader range of crypto assets and tokenized equities, international expansion and increased volatility. Trump’s pro-crypto inclination and focus on regulatory clarity further benefit Coinbase. The company generated 83% of its total revenues in the United States, which is being envisioned as a crypto hub. Management expects Coinbase to be the platform for companies that are trying to integrate cryptocurrency.

COIN vs Industry, Sector & S&P 500 YTD

COIN Trading Below 50-Day SMA

COIN has been trading below its 50-day simple moving average (SMA), signaling a short-term bearish trend.  The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as it is the first marker of an uptrend or downtrend. 
 

Shares of Robinhood Markets HOOD, a crypto-oriented company, have gained 6.9% year to date while that of Interactive Brokers Group, Inc. IBKR have lost 13.1% in the same time frame.

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 renowned 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 —enabling it to operate with minimal human intervention and significantly lower costs than traditional brokers.

Average Target Price for COIN Suggests an Upside

Based on short-term price targets offered by 23 analysts, the Zacks average price target is $280.22 per share. The average suggests a potential 60.1% upside from Monday’s closing price.

Factors Favoring COIN Stock

Coinbase, America’s largest registered crypto exchange, stands to gain from increased volatility and rising prices in the crypto asset market. The company is poised to benefit from stronger banking relationships, the acquisition of new licenses and the expansion of customized products tailored for diverse customer needs.

Focused on growth, Coinbase continues to grow its market share in both the U.S. spot and derivatives markets while broadening its product portfolio and expanding globally. Its robust liquidity enables ongoing strategic investments aimed at enhancing its service offerings and driving future growth.

The rise in stablecoin adoption is expected to further boost the company’s revenues. Coinbase has maintained positive EBITDA for eight consecutive quarters, supported by its subscription-based business model.

With a mission to bring crypto utility to a global audience, Coinbase aims to onboard over a billion users onto the crypto economy. To achieve this, it is heavily investing in core infrastructure and platforms such as Layer 2 solutions, its Base network, and stablecoins. 

Coinbase is a fundamentally strong company. It ended 2024 with $9.3 billion in resources, which is defined as cash & cash equivalents and USDC, up $3.8 billion year over year. Debt has been decreasing over the past several quarters while total debt capital ratio has been improving. Also, its higher times interest earned implies that the company can comfortably service its debt.

Earnings Whispers

The crypto leader is slated to release its first-quarter 2025 results on May 8. The Zacks Consensus Estimate for earnings and revenues indicates a year-over-year increase of 26.7% and 35.6%, respectively. The consensus estimate for earnings has moved 4.1% south in the last seven days. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Our proven model does not conclusively predict an earnings beat for COIN this time around. This is because COIN has an Earnings ESP of -7.31% and a Zacks Rank #3 (Hold). Per our proven model, companies with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 have a good chance of delivering an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
 

Coinbase Global, Inc. Price and EPS Surprise

Coinbase Global, Inc. price-eps-surprise | Coinbase Global, Inc. Quote

Favorable Return on Equity

COIN’s return on equity in the trailing 12 months was 20.6%, higher than the industry average of 16.8%, reflecting efficiency in utilizing shareholders’ funds.

The return on invested capital in the trailing 12 months was 10.6%, which compared favorably with the industry average of 5.4%. This reflects the insurer’s efficiency in utilizing funds to generate income.

Muted Analyst Sentiment for COIN

The Zacks Consensus Estimate for 2025 and 2026 earnings has moved 6.1% and 4.5% south, respectively, in the past seven days.

The Zacks Consensus Estimate for 2025 earnings suggests a 5.3% decrease but the 2026 consensus estimate for earnings implies a year-over-year increase of 1.8%.

Expensive Valuation

Coinbase shares are trading at a premium to the Zacks Financial Transaction Service Market. Its 12-month forward price-to-earnings of 23.72 is much higher than the industry average of 14.42X. Its Value Score of D suggests that the stock is not so cheap and indicates a stretched valuation at this moment.

Shares of Robinhood Markets and Interactive Brokers are also trading at multiples higher than the industry average.

Parting Thoughts on COIN Stock

Crypto asset price risk could adversely impact Coinbase’s operating results. A decline in the market price of Bitcoin, Ethereum and other crypto assets could have an adverse effect on 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.

Nonetheless, 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. 

Given its premium valuation and muted analyst sentiment, it is better to adopt a wait-and-see approach for COIN stock presently. 

You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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