Shares of cryptocurrency exchange Coinbase Global (COIN) lost significantly, with Bitcoin witnessing its biggest monthly drop since 2011 last month. The decline in retail crypto transactions and the company’s poor financials damaged investors’ sentiment about the stock. So, is COIN a Buy at the current price level, or is there further downside left? Read on…

Cryptocurrency trading and investing platform Coinbase Global, Inc. (COIN) offers users the ability to buy, sell, and exchange over 100 tradable cryptocurrencies. The stock has declined 16.9% over the past month and 78% year-to-date.

A massive crypto sell-off on fears over the Fed’s steep interest rate hikes and consequent decline in retail transactions led to COIN witnessing this poor performance. The largest cryptocurrency by market capitalization, Bitcoin lost 37.3% in June, the biggest monthly price drop since 2011. This triggered job cuts across the crypto industry.

Last month, COIN said that it would cut roughly 18% of its workforce because of the downturn in the crypto industry. COIN’s CEO Brian Armstrong said, “A recession could lead to another crypto winter, and could last for an extended period.”

Here is what could shape COIN’s performance in the near term:

Weak Financials

COIN’s total revenues decreased 35.2% year-over-year to $1.17 million during the first quarter of 2022. Its operating loss amounted to $554.46 million compared to an operating income of $987.71 million. The company’s net loss stood at $429.66 million compared to a net income of $301.90 million. The company’s loss per share amounted to $1.98 compared to an EPS of $3.05 in the previous period.

Premium Valuation

In terms of 1.99x forward Price/Book, the stock is currently trading above the 1.13x industry average.

Bleak Growth Prospects

Analysts expect COIN’s revenue to decline 50.4% in the current quarter, 48.1% in the current year, and 25.2% in the next year. However, the company's EPS is expected to decline 136.9% in the current quarter, 213% in the next quarter, and 151% in the current year.

POWR Ratings Reflect Bleak Prospects

COIN has an overall D grade, equating to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. COIN has an F grade for Growth and Sentiment. Its Growth grade is justified given its disappointing financials. Its sentiment grade is consistent with the bleak earnings estimates.

Among the 157 stocks in the F-rated Software - Application, COIN is ranked #122.

Beyond what I stated above, we have graded COIN for Growth, Stability, and Quality. Get all COIN ratings here.

Bottom Line

The stock is currently trading below its 50-day and 200-day moving averages of $75.38 and $195.37, respectively, indicating a downtrend. Since the crypto market is expected to remain under pressure on recession fears, COIN is best avoided now.

How Does Coinbase Global, Inc. (COIN) Stack Up Against its Peers?

COIN has an overall POWR Rating of D, equating to Sell. Check out these other stocks within the Software – Application industry with A (Strong Buy) ratings: Commvault Systems, Inc. (CVLT), Rimini Street Inc. (RMNI), and American Software, Inc. (AMSWA).

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COIN shares were trading at $53.87 per share on Wednesday morning, down $1.54 (-2.78%). Year-to-date, COIN has declined -78.65%, versus a -18.88% rise in the benchmark S&P 500 index during the same period.

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About the Author: Spandan Khandelwal

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.

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