Coinbase Soars Higher After Earnings Report
Coinbase ($58.71|-9.06%) shareholders are breathing a sigh of relief following the company’s earnings report on Thursday. Shares of COIN surged by more than 18% on Friday after the crypto exchange topped Wall Street estimates for the quarter. Coinbase has been under immense pressure from US regulators as the crackdown on the crypto industry continues to weigh on investors.
Despite the stock returning more than 73% so far in 2023, it is still down nearly 50% over the past year. COIN has benefited from a resurgence in the crypto market this year, with the prices of Bitcoin rising by more than 77% since the start of the year.
As for Coinbase’s earnings, on the surface, it appears to be an impressive quarter. Revenue for the company rose by 23% on a sequential quarterly basis to $773 million. This came firmly higher than the consensus estimates of $655 million. Earnings also came in well above estimates as Coinbase reported a loss of $0.34 per share compared to expectations of a loss of $1.45 per share. Overall, it was a pleasant surprise for Coinbase which has been in the headlines for all of the wrong reasons this year.
Wall Street Analysts Aren’t as Optimistic for Coinbase
The 18% rebound on Friday could have also been a bit of a short squeeze caused by short sellers closing their positions. With a short float percentage of more than 22%, Coinbase was heavily shorted following the multiple lawsuits against the company, as well as the crackdown from the SEC. Let’s just say the earnings were good, but they weren’t that good.
Wall Street analysts seem to agree as both Goldman Sachs and JPMorgan remain bearish on the stock. Goldman analysts specifically point to the ongoing regulatory uncertainty surrounding Coinbase’s future in the United States. Rumours have been swirling that Coinbase is looking to move its operations internationally after the US has made it clear that crypto companies must abide by their rules. So far, the United Kingdom and the Bahamas have been two locations linked to Coinbase’s future.
Goldman Sachs reiterated its Sell rating for Coinbase but did provide a small updated boost to its 12-month price target for the stock. The analysts raised the target from $40 to $45, while still maintaining a bearish sentiment for at least the next 12 months.
Is Coinbase Stock a Buy?
I would say it certainly isn’t after an 18% gain in one session. Even after the rebound on Friday, the stock remains below both the key 50-day and 200-day moving averages. Until it is able to reclaim those levels, Coinbase remains on a long-term downtrend.
Then there is the matter of where Coinbase will be located in the future. If the rumours are true, Coinbase could be leaving the US altogether. Considering a vast majority of its customers are based in the US, that could put a serious dent in Coinbase’s revenue. As I said, the positive quarter was a nice sign for Coinbase, but the massive gains were likely short sellers covering their shorts. Coinbase remains on my watchlist, but I still don’t have any confidence in owning it right now.
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