Robinhood (HOOD) vs. Coinbase (COIN): A Tale of Two Rebels

In the ever-evolving world of finance, few names capture the spirit of rebellion quite like Robinhood and Coinbase. Inspired by the legendary protagonist who took from the rich and gave to the poor, Robinhood (HOOD) has transformed trading by offering commission-free trades to everyday investors. Meanwhile, Coinbase (COIN), a leader in the cryptocurrency space, was born from the desire to create a decentralized financial system, challenging traditional banking norms. Both stocks have been doing well the last year, with HOOD jumping 237% and COIN climbing 125%, due to the recent euphoria surrounding Bitcoin after recently crossing the 100K landmark.

However, even for seasoned investors, the cryptocurrency world can be puzzling and unpredictable. This sector’s volatility was exemplified by the collapse of FTX, which highlighted the potential for fraud in this not-fully-known financial space, a collapse that caused significant losses. Such events highlight the importance of due diligence and risk management when investing in cryptocurrencies.

Nevertheless, both companies have disrupted the financial landscape, but how do they compare? This piece will examine both stocks’ valuation and long-term prospects, additional financials, and their performances.

Valuation and Long-Term Prospects

Robinhood: With a market cap of $34.95B and an enterprise value of $37.69B, Robinhood is highly valued by the market. Its P/E ratio of 71.0 indicates high growth expectations. While analysts have a Moderate Buy rating with a 1-year price target of $41.40, they still suggest a 4.70% upside.

Coinbase: Coinbase has a larger market cap of $77.74B and an enterprise value of $90.26B. Its P/E ratio of 58.7 also reflects significant growth expectations by investors. Like HOOD, analysts rate it as a Moderate Buy with a 1-year price target of $289.44, which indicates a 6.79% downside.

Both companies show high valuations and generate high expectations from investors, although, in spite of a larger market cap, COIN faces a projected downside, according to analysts.

Company Financials

Robinhood: The company holds $10.16B in cash, showcasing strong liquidity. If we look at some of its key metrics, we discover positive ratios of Price to Book (P/B) of 4.85 and Price to Sales (P/S) of 14.29. These figures indicate that investors are willing to pay a premium for Robinhood’s stock relative to its book value and sales, showing its investors’ confidence in its future growth. Robinhood’s financial health is enhanced by a return on equity of 7.62% and asset growth of 64.32% over the trailing 12 months.

Coinbase: Coinbase has no cash on hand and $4.23B in debt, which could be a concern. Its key ratios include a P/B of 9.86 and a P/S of 15.45. Despite these figures, Coinbase’s financials reflect a clear dominant position in the cryptocurrency market.

Robinhood’s strong liquidity and positive financial ratios highlight its robust financial health. On the other hand, Coinbase’s significant debt and lack of cash present potential concerns despite its dominant market position in the cryptocurrency sector.

Diversified Business and Stock Performance

Robinhood: In addition to traditional stock trading, Robinhood also offers options and cryptocurrency trading, making it a much more diversified platform. Over the last year, Robinhood’s stock has shown significant growth, with a positive momentum of 269.74% over the past 12 months.

Coinbase: In contrast, Coinbase remains focused on the cryptocurrency market, providing a secure platform for buying, selling, and managing digital assets. Its stock has also seen substantial rises, reflecting the growing adoption of cryptocurrencies. While Robinhood’s diversified offerings and impressive stock growth highlight its general appeal, Coinbase’s focus on the cryptocurrency market emphasizes its role in the growing digital asset space.

Beta Score and TipRanks’ Smart Score:

Robinhood: With a beta of 2.37, Robinhood’s stock is more exposed to volatility than the broader market. However, its Smart Score is 8, indicating an “Outperform” rating, supported by bullish sentiment from bloggers, the public, and news sources.

Coinbase: Coinbase’s higher beta of 3.58 indicates even greater volatility. Its TipRanks Smart Score is 4, reflecting a neutral outlook. Despite bullish sentiment from bloggers and the public, the decrease in hedge fund holdings and insider selling are points of caution.

Who’s the Winner, Then?

While Robinhood and Coinbase embody the spirit of financial rebellion, their paths and prospects differ. Robinhood’s strong liquidity, diversified offerings, and positive sentiment make it a compelling choice for investors. Coinbase, with its larger market cap and focus strictly on the cryptocurrency market, offers substantial growth potential but comes with higher risk. Given the added risk associated with cryptocurrency, as exemplified by the FTX collapse, and the better Smart Score going forward, Robinhood emerges as the better and safer choice.