Coinbase Global, Inc. (COIN) has been one of the most popular stocks among Zacks.com visitors recently, so it is a good idea to take a look at some factors that could impact the stock's near-term performance.
Over the past month, the company's shares have returned -12.9%, compared to a +3% change for the Zacks S&P 500 Composite Index. During this period, the Zacks Financial Trading Services industry, which Coinbase Global belongs to, has gained 4%. The big question here is, what is the future direction for this stock?
While media reports or rumors of major changes in a company's business prospects usually influence the movement of that company's share price, leading to immediate price movements, there are always certain fundamental factors that ultimately drive a buy-and-hold decision.
Earnings forecast revision
At Zacks, we evaluate changes in a company's future earnings estimates above all else because we believe the present value of future earnings streams determines the fair value of a stock.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings forecasts in light of the latest business trends. When a company's earnings forecast goes up, the fair value of its stock also goes up. And if a stock's fair value is higher than its current market price, investors are more inclined to buy the stock, resulting in an increase in its share price. For this reason, empirical research shows a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, Coinbase Global is projected to post earnings of $0.59 per share, which would represent a +6,000% change from the year-ago period. The Zacks Consensus Estimate has changed -36.9% within the past 30 days.
The consensus earnings estimate for the current fiscal year is $5.68, indicating a change of +1,435.1% year over year. Over the past 30 days, this estimate has changed -13.5%.
Looking at the next fiscal year, the consensus revenue estimate is $2.52, representing a -55.6% change from what Coinbase Global was expected to report a year ago. Over the past month, estimates have changed -24.8%.
The Zacks Rank, our proprietary stock rating tool that has an impressive outside-audited track record, effectively harnesses the power of earnings estimate revisions and is a more reliable indicator of near-term stock price movements. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings expectations, has earned Coinbase Global a Zacks Rank #3 (Hold).
The story continues
The chart below shows the evolution of the company's consensus EPS estimates over the next 12 months.
12 Month EPS
Revenue Growth Forecast
A company's earnings growth is arguably the best indicator of a company's financial health, but nothing happens if the company can't grow earnings. It's nearly impossible for a company to grow its earnings without growing its revenue over the long term. Therefore, knowing a company's earnings growth potential is very important.
For Coinbase Global, the consensus estimate for revenue for the current quarter is $1.3 billion, indicating a change of +93.1% year-over-year. For the current and next fiscal years, estimates of $5.74 billion and $5.34 billion indicate changes of +84.8% and -7%, respectively.
Last reported results and surprise history
Coinbase Global reported revenue of $1.45 billion for the most recent quarter, up +104.8% year over year. EPS for the same period was $1.07, up compared to -$0.42 in the same period last year.
Compared to the Zacks Consensus Estimate of $1.43 billion, reported revenues represented a surprise of +1.19%. EPS surprise was 0%.
Over the last four quarters, Coinbase Global has surpassed consensus EPS estimates three times, and the company also topped consensus revenue estimates each time during that period.
evaluation
No investment decision can be made efficiently without taking into account stock valuation. Whether a stock's current price properly reflects the intrinsic value of its business and the company's growth prospects is a key factor in determining future stock price movements.
Comparing the current value of a company's valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S), Price to Cash Flow (P/CF) with its historical values helps in identifying whether the stock is fairly valued, overvalued or undervalued. Also, comparing a company with its peers based on these parameters gives a good idea of how reasonably priced its stock is.
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional valuation criteria to rate stocks from A to F (with An being better than B, B being better than C, etc.), which can be very helpful in identifying whether stocks are overvalued, fairly valued or temporarily undervalued.
Coinbase Global is rated an F on this scale, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz around Coinbase Global is worth following, although its Zacks Rank #3 suggests it may be capable of performing in line with the broader market in the near term.
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Coinbase Global, Inc. (COIN) : Free Stock Analysis Report
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