Coinbase has retaken the 50-day moving average after a pullback. But Coinbase stock can be volatile since the price of bitcoin affects it. Is it a buy now?
The stock ranks fourth in the financial services specialty group, according to IBD Stock Checkup. Its Composite Rating is nearly ideal at 98, but it's EPS Rating is 81. The stock has outperformed the vast majority of other stocks in the Investor's Business Daily database, going by the Relative Strength Rating of 94.
The stock got a strong lift after the November elections, and the outlook for crypto-related stocks brightened. Trump announced plans for a bitcoin strategic reserve fund back in July during a bitcoin conference, according to reports.
On Thursday, the White House released an executive order with a view to promoting access to public blockchains for mining, validating and self-custody purposes. The order also made a mention of promoting stablecoins that are backed by the U.S. dollar while taking steps to prohibit the use of a Central Bank Digital Currency(CBDC) within the U.S. The President also established a President's Working Group on Digital Assets Markets which will provide its proposals for a regulatory framework for digital assets within 180 days.
Based on Thursday's closing price, shares of Coinbase had gained 53% since Nov. 5 in the postelection rally.
On Thursday, the Senate voted to appoint Sen. Cynthia Lummis (R-WY), a supporter of cryptocurrencies and a backer of the bitcoin strategic reserve fund, to lead the Banking Subcommittee on Digital Assets.
On Tuesday, the Securities and Exchange Commission appointed a crypto task force to develop a framework for digital assets. The SEC has maintained that most crypto assets are securities and fall under its regulations. But Coinbase has been petitioning for a separate set of crypto rules since 2022.
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Bitcoin Affects Coinbase Stock Price
The price of bitcoin has affected the stock's performance. Bitcoin touched an all-time high of $108,659 on Monday as Trump took office. Trump's crypto-friendly view has been powering the digital asset and lifting Coinbase stock.
The stock had an impressive run in 2024, gaining 43% whereas the S&P 500 rose just 23%. That performance followed an even more impressive gain in 2023, when the stock rallied 391%. Bitcoin doubled in 2024; in 2023, the coin gained 150%. In 2022, bitcoin crashed more than 65% while Coinbase stock suffered an 86% fall.
Coinbase shares fell after third-quarter results were announced on Oct. 30 but found support at the 50 day moving average. Company sales grew 79% to $1.2 billion while earnings of 28 cents per share reversed a loss of 1 cent in the prior year.
Sales, however, declined 17% vs. the second quarter as lower transaction revenue and lower crypto asset prices affected subscription and services revenue. For the fourth quarter, the company's midpoint sales outlook for that segment was $543 million.
For the fourth quarter, analysts polled by FactSet estimate $1.67 billion in revenue, a 75% increase from the year-ago period. Earnings are seen growing 55% to $1.61 per share. Analysts also see a strong surge in profits for 2024 of 1,652%.
Coinbase started in 2012 as a simplified way of trading bitcoin. The stock listed on the Nasdaq in April 2021 at an initial offering price of $250 a share. A direct listing allowed investors to sell the stock directly at the market price. The stock quickly rocketed to an all-time high of 429.54 but crashed, reaching an all-time low of 31.55 in January 2023.
Coinbase is the largest U.S. cryptocurrency exchange and allows trading in several other digital coins. The platform also offers crypto staking, custody and transfer services. Bitcoin and ethereum see the highest volume, but several other coins are also listed and trade on the Coinbase platform. According to its website, Coinbase has $273 billion in assets with a quarterly trading volume of $185 billion.
Mutual funds own 30% of shares outstanding. More funds have been buying the stock over the past six quarters. Funds have also been loading up over the recent thirteen weeks, giving the stock an Accumulation/Distribution Rating of B on a scale of A-E.
Coinbase Offers Buy Point
Shares are forming a cup base with a buy point of 349.75. The buy point is also a three-year high for the stock.
Spot Bases And Buy Points With Pattern Recognition
The relative strength line on IBD MarketSurge, which compares the stock against the S&P 500, is beginning to rise as well.
However, the base is a late-stage one, which makes it riskier. Late-stage bases may not net the high gains that early-stage bases historically do. Coinbase shares have retaken the 50-day moving average, and that can be used as an early entry by investors with a more active trading style.
And don't forget, fluid crypto rules and policies can move the stock in ways that investors must prepare for.
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