As Bitcoin (BTC-USD) heads toward $70,000, some bullish traders may exude confidence that October will continue to be a boon for Coinbase Global (COIN) shareholders. However, let’s not make too many assumptions about the chances of a strong finish to the month and the year. Near-term outcomes are hard to predict, and I am neutral on COIN stock for the remainder of October and 2024, even though Coinbase may be in a good position regardless of who occupies the White House.
Don't Miss our Black Friday Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Coinbase Global operates a cryptocurrency exchange in which users can buy and sell Bitcoin and some other popular digital assets. The first half of October was good for Bitcoin as it rallied from around $61,000 to $68,000 recently; however, that recent rise will not affect Coinbase’s upcoming Q3 earnings results, which I will discuss momentarily.
The political backdrop is meaningful since the U.S. presidential election is coming up on November 5, and cryptocurrency is an area that could receive new regulatory proposals or loosening of existing laws. Coinbase shareholders should continue to assess how presidential candidates, former President Donald Trump and current Vice President Kamala Harris, feel about Bitcoin and cryptocurrency in general. Investors will also be keen to see how Coinbase has fared in Q3 when the company reports its earnings results on October 30.
Coinbase Is a Revenue Grower That Usually Beats Earnings Estimates
In pointing investors to TipRanks’ Financials Page for Coinbase Global, they’ll note that the company has seen revenue growth re-emerge in recent quarters. Impressively, Coinbase’s total revenue has improved from less than $800 million in the quarters ended June 2023 and September 2023 to around $1.35 billion for the quarter ended June 2024. Coinbase’s free cash flow, which stood at around $135.41 million in the quarter ended June 2023, has exceeded $400 million per quarter recently.
Wall Street analysts expect Coinbase to have earned $0.41 per share in Q3. Coinbase has beaten Wall Street’s consensus EPS estimates in six out of the last seven quarters. Bitcoin prices have also rallied meaningfully since a near-term low during the first week of September. This should have a positive impact on Coinbase’s current-quarter financial performance.
On the other hand, just because Coinbase has beaten earnings in past quarters doesn’t mean they will for Q3 2024, and the potential remains for COIN stock to drop even if the results are good. Always bear in mind that beating analyst estimates doesn’t always result in a positive move for a stock. Therefore, cautious investors can certainly choose to limit their exposure to the stock if they want to.
Trump’s View on Cryptocurrency Is Pretty Clear, but Don’t Overlook New Information from Kamala Harris
While Coinbase’s Q3 earnings report will be consequential for COIN shareholders, there’s another important upcoming event that can’t be overlooked. Of course, I’m referring to the U.S. presidential election, and right now, it looks like a “coin toss” (no pun intended) with no way to easily predict the winner. For the time being, the best thing that cryptocurrency enthusiasts and COIN stockholders can do is assess the positions of the two main candidates, Trump and Harris.
At the very least, it’s fair to conclude that Trump is a strong advocate of crypto. At the Bitcoin Conference that took place in July, Trump said outright, “Never sell your Bitcoin,” and vowed to “fire Gary Gensler,” the current Securities and Exchange Commission (SEC) chairman, “on day one.” That’s relevant because Gensler is sometimes perceived as hostile to cryptocurrency, and he is sometimes at odds with Coinbase CEO Brian Armstrong.
It’s less clear how Vice-President Harris views the cryptocurrency space. For a while this year, it was difficult to get a read on her position. Recently, her campaign published a report in which Harris expressed support for a “regulatory framework for cryptocurrency and other digital assets.” Additionally, the document reported that over 20% of “Black Americans own or have owned cryptocurrency assets.”
The report also states that Harris “appreciates the ways in which new technologies can broaden access to banking and financial services.” Yet, let’s not jump to the conclusion that a Harris presidency will advance the interests of those who hold digital assets and COIN stock. After all, a “regulatory framework” under Harris could include strict regulations of Bitcoin trading exchanges such as Coinbase.
Considering Coinbase’s Valuation
Additionally, Coinbase’s valuation makes me think twice about considering a share position. On a trailing 12-month basis, Coinbase has a GAAP price-to-earnings (P/E) ratio of approximately 37x. Meanwhile, the sector median P/E ratio is 13.59x. This doesn’t necessarily mean Coinbase shares are uninvestable, however.
My point is that Coinbase won’t appeal to value hunters if they’re assessing the company’s P/E ratio. This doesn’t have to be the only metric to consider, but it’s a commonly cited one and it certainly doesn’t suggest that Coinbase stock is an irresistible bargain right now.
Is Coinbase Stock a Buy, According to Analysts?
On TipRanks, COIN comes in as a Moderate Buy based on seven Buys, seven Holds, and one Sell ratings assigned by analysts in the past three months. The average COIN stock price target is $258.17, implying about 25% upside potential.
If you’re wondering which analyst you should follow on COIN stock, the most accurate analyst covering this name (on a one-year timeframe) is Joseph Vafi of Canaccord Genuity, with an average return of 62.91% per rating and a 57% success rate. Click on the image below to learn more.
Conclusion: Should Investors Consider Coinbase Stock?
There’s some uncertainty surrounding Coinbase Global’s upcoming earnings report. However, the company’s recent earnings track record is fairly good, and there are other indications that the company’s financials are in good shape overall. At the same time, Coinbase’s past earnings beats don’t guarantee another estimate-topping result for Q3, nor a further rally in Coinbase stock.
Meanwhile, I believe Coinbase and the crypto-verse generally could find blue skies regardless of whether Trump or Harris captures the White House. However, should the Democrats win the election, investors should wait for further clarity on what Harris is considering in terms of cryptocurrency regulations.
If you’re a Bitcoin bull, it could make sense to own Coinbase shares before and/or after the October 30 earnings event. Personally, I’m staying on the sidelines since the upcoming earnings result won’t necessarily beat estimates, and because Harris’s position on crypto exchange regulations isn’t crystal clear yet. Hence, I take a neutral stance when it comes to COIN stock.
