COIN Stock Could Jump 15% Despite Layoffs and Dilution

Today we are looking at Coinbase Global, Inc. (NASDAQ: COIN), to determine if the COIN stock is a good buy. We will look at COIN financial ratios, analyst ratings, and valuation to determine a COIN stock forecast and price. What does COIN Do? Coinbase Global, Inc. provides financial infrastructure and technology for the cryptoeconomy in the United States and internationally. The company offers the primary financial account in the cryptoeconomy for retailers; a marketplace with a pool of liquidity for transacting in crypto assets for institutions; and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto assets as payment. Coinbase Global, Inc. was founded in 2012. Key Information for a COIN Stock Forecast Who are Coinbase Global, Inc.'s Competitors? In order to undergo a comparable analysis (to determine COIN stocks value), we need to first outline who COIN's competitors are. These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to COIN, and have a market cap similar to COIN (if possible). By keeping this in mind, I found the following list of companies to be some of COIN stocks closest competitors: HOOD, VYGVF, PYPL, and MARA COIN Stock News and Information COIN Stock in Recent News? Recently (June 14, 2022), Coinbase announced that they will cut 18% of full-time jobs, according to an email sent to employees Tuesday morning. Coinbase has roughly 5,000 full-time workers, translating to a total of 1,100 people becoming jobless. As a result of this unfortunate news, the COIN stock fell about 5.4%. Overall, whie this is bad on paper, I think that it was the right move, and will be best for their stock price. Since the crypto markets have historically gone though long 2-3 year "bear/stagnant market" periods, followed by a shorter 1+ year "bull market" period. Currently, it is looking as though the crypto market is headed back to a longer bear market, which Coinbase has realized and made adjustments for. This will help the COIN stock come earnings as their operating expenses should be lowered due to lesser wages being paid. Additionally, I think that COIN will learn a valuable lesson from this. I think that they will be more cautious in their hiring when we appear to enter the next bull market. Furthermore, they might have more contractual work during this time so that they will not have to lay-off and compensate workers (as the period of employment was previously set and agreed upon. If you would like to continue reading about this, a link to a CNBC article is here COIN Earnings: Great, Horrible, or Both? COIN Earnings (Yearly): COIN Revenues: In FY 2021, COIN experienced a yearly increase in revenues of $6.56B (or 513.66%) resulting in a total revenue figure of $7.84B. This growth is huge (but expected) due to the 2021 crypto bull market. COIN Cost of Revenues: In FY 2021, COIN experienced a yearly increase in their cost of revenues of $1.13B (835.64%), resulting in a total revenue figure of $1.27B. COIN Gross Profit: In FY 2021, COIN experienced a yearly increase in their gross profit of $5.43B (or 475.46%) resulting in a total gross profit of $6.57B.  COIN EBITDA: In FY 2021, COIN experienced a yearly increase in their EBITDA of $2.65B (or 602.15%) resulting in a total EBITDA of $3.09B. This increase (of 602.15%) stems from the fact that COIN experienced a huge increase in their gross profits of 475.46%. COIN Net Income: In FY 2021, COIN experienced a yearly increase in their net income of $3.3B (or 1,024%) resulting in a total net income of $3.62B. This is great news for COIN for 2 reasons. Firstly, their net income was huge. Secondly, we can notice that in 2020 COIN had a net income of $320M which implies that they were profitable despite crpyto being relatively stable for 9 months in 2020 (before it took off in September of 2020). COIN EPS: As a result of COIN's increase in net income of $3.3B, COIN's EPS also increased (by $15.53) from $1.76 in FY 2020 to $17.29 in FY 2021 Overall, in 2021 COIN earnings were fantastic due to the occurance of a year long bull market. However, how have they performed more recently when we have seen crypto start to dip and head towards a potential bear market? Let's look at the Q1 2022 COIN earnings to find out. COIN Earnings (Quarterly): COIN Revenues: In Q1 2022, COIN experienced a quarterly decrease in revenues of $-1.33B (or -53.31%) resulting in a total revenue figure of $1.17B. COIN Cost of Revenues: In Q1 2022, COIN experienced a quarterly decrease in their cost of revenues of $-223.35M (-44.57%), resulting in a total revenue figure of $277.83M. Since the decrease (of -44.57%), in COIN's cost of revenue was greater (by 8.75%) than the decrease (of -53.31%) in COIN's revenues, we should expect that COIN experienced an decrease in their Q1 2022 gross profits. COIN Gross Profit: In Q1 2022, COIN experienced a quarterly decrease in their gross profit of $-1.11B (or -55.51%) resulting in a total gross profit of $888.61M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 and Q4. Furthermore, this figure is representative of the performance we can come to expect from COIN during a crypto bear market. COIN EBITDA: In Q1 2022, COIN experienced a quarterly decrease in their EBITDA of $-1.47B (or -160.83%) resulting in a total EBITDA of $-555.73M. Although we expected a decrease to all of COIN  important fiananncial metrics, we might not haveexpected this decrease to result in negative EBITDA and earnigns. This negative EBITDA is a very bad indicator of what might come, and might be the reason for widespread layoffs. COIN Net Income: In Q1 2022, COIN experienced a quarterly decrease in their net income of $-1.27B (or -151.14%) resulting in a total net income of $-429.66M. Once again this negative earnings figure is quite worrisome, and should have investors glued to their upcoming Q2 2022 earnings. COIN EPS: As a result of COIN's decrease in net income of $-1.27B, COIN's EPS also decreased (by $-5.6) from $3.62 in Q4 2021 to $-1.98 in Q1 2022. Overall, it COIN had a poor financial performance as many of their financial metrics shrunk, most notably their EPS (by $-5.6), as well as their net income (by $-1.27B), and other metrics (as you can tell from the above bullet points). Additionally, COIN stock missed their EPS estimate by $-2.19 (or -1,043%), as they reported an EPS of $-1.98 for the quarter (compared to their estimated EPS of $0.21). This is just the nail in the coffin of a horrific earnings report. It is now very evident why COIN is making strides to lower costs, however, we will have to wait until the Q3 2022 earnings report in order to see the full impacts of these layoffs (potentially longer due to the compensation structure that COIN is giving their layed off employees. COIN Stock Dilution Could be Problematic As part of their Q1 2022 earnings release, COIN stated that they currently have 217.47M Shares Outstanding (weighted average), which is up 7.87M shares (from 209.6M shares outstanding in Q4 2021). This represnts a 3.5% share dilution, which is very high for a quarterly time period. Investors should pay close attention to COIN share dilution moving forward,. Furthemore, potential investors should be aware of this before investing. Furthermore, COIN stock has up to 40.93M of shares that they can issue (thereby diluting COIN's stock). This maximum dilution for the period would only have a dilutionary effect on COIN of 15.8%, which is a very high amount, and should have investors worried. Analyst Opinions on the COIN Stock Here is the current spread of COIN stock ratings. In total there are 32 COIN stock ratings, which fall in the following categories. 22 Buys 9 Holds 1 Sells Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if COIN stock is a buy or sell. The overwhelming majority of analysts are in consensus that the COIN stock is a "buy" at their current share price. This is a good indicator that COIN may be undervalued. However, you should never just solely pay attention to analyst ratings. COIN Stock Price Prediction is Bullish Using a Comparable Analysis to Determine a COIN Stock Price Prediction Price to Book (P/B): COIN's current P/B ratio is 1.77, compared to the average P/B ratio of COIN's peers being 1.75. This implies that COIN is overvalued and their share price should change by a factor of -1.14% to be at fair value (based on COIN's P/B compared to the P/B of their peers). Price to Sales (P/S): COIN stock P/S ratio is currently 1.45, compared to the average P/S ratio of COIN's peers being 2.71. This implies that COIN is undervalued and their share price should change by a factor of 86.9% to be at fair value (based on COIN's P/S compared to the P/S of their peers). Overall, COIN stock is undervalued and needs to experience a change in stock price of (an average of) 42.88% to be considered “at fair value”. Is COIN a good stock to buy right now? Overall, our COIN stock forecast implies that COIN is undervalued and needs to experience a price change of 42.88% in order to be at their fair value, analysts seem rather bullish, and Coinbase's 2021 earnings were great. However, there are many other factors that are looming over COIN and causing their stock to plummet. These include stock dilution, poor recent financials (Q1 2022), and widespread layoffs. Taking all of this into account makes this decision very difficult. However, I think that the positive aspects of the COIN stock slightly outweigh the negative aspects, and thus I would consider entering into a position into COIN. However, I would not look for the 42% return as reached in the commparable analysis. Rather, I would take a more conservative approach and look for quick 15-20% rebound before exiting. This is due to all of the negative factors surrounding COIN stock.

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COIN Stock Could Jump 15% Despite Layoffs and Dilution

Jun 14, 2022

bullish

general Analysis

[7 min Read]

blog post cover photo

Photo by: Jeremy Bezanger

Today we are looking at Coinbase Global, Inc. (NASDAQ: COIN), to determine if the COIN stock is a good buy. We will look at COIN financial ratios, analyst ratings, and valuation to determine a COIN stock forecast and price.

What does COIN Do?

Coinbase Global, Inc. provides financial infrastructure and technology for the cryptoeconomy in the United States and internationally. The company offers the primary financial account in the cryptoeconomy for retailers; a marketplace with a pool of liquidity for transacting in crypto assets for institutions; and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto assets as payment. Coinbase Global, Inc. was founded in 2012.

Key Information for a COIN Stock Forecast

Who are Coinbase Global, Inc.'s Competitors?

In order to undergo a comparable analysis (to determine COIN stocks value), we need to first outline who COIN's competitors are.

These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to COIN, and have a market cap similar to COIN (if possible).

By keeping this in mind, I found the following list of companies to be some of COIN stocks closest competitors:

HOOD, VYGVF, PYPL, and MARA

COIN Stock News and Information

COIN Stock in Recent News?

Recently (June 14, 2022), Coinbase announced that they will cut 18% of full-time jobs, according to an email sent to employees Tuesday morning. Coinbase has roughly 5,000 full-time workers, translating to a total of 1,100 people becoming jobless. As a result of this unfortunate news, the COIN stock fell about 5.4%.

Overall, whie this is bad on paper, I think that it was the right move, and will be best for their stock price. Since the crypto markets have historically gone though long 2-3 year "bear/stagnant market" periods, followed by a shorter 1+ year "bull market" period. Currently, it is looking as though the crypto market is headed back to a longer bear market, which Coinbase has realized and made adjustments for. This will help the COIN stock come earnings as their operating expenses should be lowered due to lesser wages being paid.

Additionally, I think that COIN will learn a valuable lesson from this. I think that they will be more cautious in their hiring when we appear to enter the next bull market. Furthermore, they might have more contractual work during this time so that they will not have to lay-off and compensate workers (as the period of employment was previously set and agreed upon.

If you would like to continue reading about this, a link to a CNBC article is here

COIN Earnings: Great, Horrible, or Both?

COIN Earnings (Yearly):

  • COIN Revenues: In FY 2021, COIN experienced a yearly increase in revenues of $6.56B (or 513.66%) resulting in a total revenue figure of $7.84B. This growth is huge (but expected) due to the 2021 crypto bull market.
  • COIN Cost of Revenues: In FY 2021, COIN experienced a yearly increase in their cost of revenues of $1.13B (835.64%), resulting in a total revenue figure of $1.27B.
  • COIN Gross Profit: In FY 2021, COIN experienced a yearly increase in their gross profit of $5.43B (or 475.46%) resulting in a total gross profit of $6.57B.
  • COIN EBITDA: In FY 2021, COIN experienced a yearly increase in their EBITDA of $2.65B (or 602.15%) resulting in a total EBITDA of $3.09B. This increase (of 602.15%) stems from the fact that COIN experienced a huge increase in their gross profits of 475.46%.
  • COIN Net Income: In FY 2021, COIN experienced a yearly increase in their net income of $3.3B (or 1,024%) resulting in a total net income of $3.62B. This is great news for COIN for 2 reasons. Firstly, their net income was huge. Secondly, we can notice that in 2020 COIN had a net income of $320M which implies that they were profitable despite crpyto being relatively stable for 9 months in 2020 (before it took off in September of 2020).
  • COIN EPS: As a result of COIN's increase in net income of $3.3B, COIN's EPS also increased (by $15.53) from $1.76 in FY 2020 to $17.29 in FY 2021

Overall, in 2021 COIN earnings were fantastic due to the occurance of a year long bull market. However, how have they performed more recently when we have seen crypto start to dip and head towards a potential bear market? Let's look at the Q1 2022 COIN earnings to find out.

COIN Earnings (Quarterly):

  • COIN Revenues: In Q1 2022, COIN experienced a quarterly decrease in revenues of $-1.33B (or -53.31%) resulting in a total revenue figure of $1.17B.
  • COIN Cost of Revenues: In Q1 2022, COIN experienced a quarterly decrease in their cost of revenues of $-223.35M (-44.57%), resulting in a total revenue figure of $277.83M. Since the decrease (of -44.57%), in COIN's cost of revenue was greater (by 8.75%) than the decrease (of -53.31%) in COIN's revenues, we should expect that COIN experienced an decrease in their Q1 2022 gross profits.
  • COIN Gross Profit: In Q1 2022, COIN experienced a quarterly decrease in their gross profit of $-1.11B (or -55.51%) resulting in a total gross profit of $888.61M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 and Q4. Furthermore, this figure is representative of the performance we can come to expect from COIN during a crypto bear market.
  • COIN EBITDA: In Q1 2022, COIN experienced a quarterly decrease in their EBITDA of $-1.47B (or -160.83%) resulting in a total EBITDA of $-555.73M. Although we expected a decrease to all of COIN important fiananncial metrics, we might not haveexpected this decrease to result in negative EBITDA and earnigns. This negative EBITDA is a very bad indicator of what might come, and might be the reason for widespread layoffs.
  • COIN Net Income: In Q1 2022, COIN experienced a quarterly decrease in their net income of $-1.27B (or -151.14%) resulting in a total net income of $-429.66M. Once again this negative earnings figure is quite worrisome, and should have investors glued to their upcoming Q2 2022 earnings.
  • COIN EPS: As a result of COIN's decrease in net income of $-1.27B, COIN's EPS also decreased (by $-5.6) from $3.62 in Q4 2021 to $-1.98 in Q1 2022.

Overall, it COIN had a poor financial performance as many of their financial metrics shrunk, most notably their EPS (by $-5.6), as well as their net income (by $-1.27B), and other metrics (as you can tell from the above bullet points).

Additionally, COIN stock missed their EPS estimate by $-2.19 (or -1,043%), as they reported an EPS of $-1.98 for the quarter (compared to their estimated EPS of $0.21). This is just the nail in the coffin of a horrific earnings report. It is now very evident why COIN is making strides to lower costs, however, we will have to wait until the Q3 2022 earnings report in order to see the full impacts of these layoffs (potentially longer due to the compensation structure that COIN is giving their layed off employees.

COIN Stock Dilution Could be Problematic

As part of their Q1 2022 earnings release, COIN stated that they currently have 217.47M Shares Outstanding (weighted average), which is up 7.87M shares (from 209.6M shares outstanding in Q4 2021). This represnts a 3.5% share dilution, which is very high for a quarterly time period. Investors should pay close attention to COIN share dilution moving forward,. Furthemore, potential investors should be aware of this before investing.

Furthermore, COIN stock has up to 40.93M of shares that they can issue (thereby diluting COIN's stock). This maximum dilution for the period would only have a dilutionary effect on COIN of 15.8%, which is a very high amount, and should have investors worried.

Analyst Opinions on the COIN Stock

Here is the current spread of COIN stock ratings. In total there are 32 COIN stock ratings, which fall in the following categories.

  • 22 Buys
  • 9 Holds
  • 1 Sells

Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if COIN stock is a buy or sell. The overwhelming majority of analysts are in consensus that the COIN stock is a "buy" at their current share price. This is a good indicator that COIN may be undervalued. However, you should never just solely pay attention to analyst ratings.

COIN Stock Price Prediction is Bullish

Using a Comparable Analysis to Determine a COIN Stock Price Prediction

  1. Price to Book (P/B): COIN's current P/B ratio is 1.77, compared to the average P/B ratio of COIN's peers being 1.75. This implies that COIN is overvalued and their share price should change by a factor of -1.14% to be at fair value (based on COIN's P/B compared to the P/B of their peers).
  2. Price to Sales (P/S): COIN stock P/S ratio is currently 1.45, compared to the average P/S ratio of COIN's peers being 2.71. This implies that COIN is undervalued and their share price should change by a factor of 86.9% to be at fair value (based on COIN's P/S compared to the P/S of their peers).

Overall, COIN stock is undervalued and needs to experience a change in stock price of (an average of) 42.88% to be considered “at fair value”.

Is COIN a good stock to buy right now?

Overall, our COIN stock forecast implies that COIN is undervalued and needs to experience a price change of 42.88% in order to be at their fair value, analysts seem rather bullish, and Coinbase's 2021 earnings were great. However, there are many other factors that are looming over COIN and causing their stock to plummet. These include stock dilution, poor recent financials (Q1 2022), and widespread layoffs.

Taking all of this into account makes this decision very difficult. However, I think that the positive aspects of the COIN stock slightly outweigh the negative aspects, and thus I would consider entering into a position into COIN. However, I would not look for the 42% return as reached in the commparable analysis. Rather, I would take a more conservative approach and look for quick 15-20% rebound before exiting. This is due to all of the negative factors surrounding COIN stock.

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COIN

Coinbase Global, Inc.

48.35

-0.69
-1.41%

Return

-8.04%
Change % Since Posting
-4.23
Change Since Posting
52.58
Price When Posted

Metrics

59.44
Target Price
7/ 10
Confidence
1-2 Months
Timeframe
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