Coinbase: An Opportunity Amid The Volatility, Watching One Key Level (Rating Upgrade)

Summary I am upgrading Coinbase stock to a buy due to its strong sales and earnings power, coupled with technical support on the chart. Despite recent stock volatility, COIN's forward P/E ratio is now under 20x, and it trades at a discount to its long-term price-to-sales ratio. Regulatory concerns and competition remain risks, but with high free cash flow and planned tech investments, COIN is positioned for growth. Technically, COIN has room to rise, with key support at $142 and resistance near $240, making it a favorable risk/reward opportunity. Monday marked a record-breaking day for trading volumes across markets. A total of 29.2 billion shares were traded, setting a new all-time high, according to data from State Street Global Advisors, as reported by CNBC’s Bob Pisani. Dollar volume also reached unprecedented levels, hitting $1.5 trillion. ETFs contributed big time to this surge, with ETF dollar volume reaching a record $635 billion. That’s an obvious boon to trading exchanges. Among the stocks that bounced substantially off the bear-market lows, so far, is Coinbase Global (COIN). While not exactly like firms like CME Group (CME) or Intercontinental Exchange (ICE), Coinbase should benefit from increased buying and selling activity, particularly in the crypto space. After shares more than halving from their December 2024 all-time high, I am upgrading the stock to a buy. I was cautious on the name last year , and now see its sales and earnings power as pairing well with technical support on the chart. Bitcoin Tumbles, But Remains Up YoY, Rising Volumes Seeking Alpha Back in February, Coinbase reported a strong set of quarterly results. Q4 GAAP EPS of $4.68 topped the Wall Street consensus forecast by a whopping $2.55, while revenue of $2.27 billion , up 138% from the same period a year earlier, was a material $430 million beat. Shares traded lower by 8% in the session that followed, however, as the broader momentum trade came undone. The big end to last year was driven by a strong crypto market in wake of President Trump’s November 5 election win. Total on-chain volume hit $439 million, up 137% sequentially . Its subscription and services net sales also rose 15% from the end of Q3 as Coinbase continued to diversify beyond transaction-based operations. The reason for the post-earnings stock plunge? Perhaps we can pin it to the street’s questioning the long-term sustainability of EPS growth as competitive pressures increase. Importantly, though, the SEC dropped its lawsuit against the company without issuing financial penalties. For the quarter that just ended, the management team said it expects transaction revenue to reach $750 million as of the Q4 reporting date, with subscription and services net sales to tally between $685-$765 million. On the call, it expressed confidence about crypto’s future and prided itself on being an “all-weather” company. Price action may take issue with that, but with big international growth, there is reason for the sanguine words. Coinbase plans to allocate between $750-$900 million on tech in the years ahead, so cost control will be important to monitor. On the earnings outlook, analysts expect non-GAAP EPS to fall by 16% this year, but growth may return in FY 2026. With ebbs and flows in its bottom line, Coinbase’s forward price-to-earnings ratio has dipped to under 20x, given the recent market plunge. I’m encouraged to see that there have been a high 18 sellside EPS upgrades in the past 90 days compared with just a lone analyst downgrade. Moreover, profitability trends are decent with this volatile company—free cash flow per share is high at $10.34, resulting in a FCF yield of more than 6%. Coinbase: Revenue & Earnings Forecasts, EPS Revision Trends Seeking Alpha On valuation , the stock now trades at a discount to its long-term price-to-sales ratio. Its forward operating P/E multiple has plunged from above 80x late last year to merely in-line with the S&P 500. That corresponds to the P/E nadir from early 2022. So, the valuation case is solid today, in my view. If we apply a 25x multiple on $8 of normalized non-GAAP EPS, that’s an intrinsic value of $192, making COIN inexpensive today. Furthermore, if we granted the stock a 5-year average P/S ratio of 7.9x, then COIN would be about 20% higher from here. With higher crypto prices today and another year of management experience under its belt, I am willing to grant the company a higher P/S compared with my analysis more than a year ago. COIN: Now A Market P/E Multiple, Cheap vs History on Sales Seeking Alpha There are many risks, though. There are ongoing regulatory concerns, the SEC’s lawsuit being dropped notwithstanding. Coinbase must also work to preserve its profit margins as competition grows and the risk of fee compression lingers. As mentioned earlier, with large capex plans, keeping operational costs in check is key for its intermediate-term success. Bigger picture, weaker cryptocurrency prices would be an obvious drag on sales and EPS, while cyberattacks could specifically target a firm like Coinbase. Competitor Analysis Seeking Alpha Looking ahead, corporate event data provided by Wall Street Horizon show an unconfirmed Q1 2025 earnings date of Thursday, May 1 AMC. No other volatility catalysts are seen on the calendar. Corporate Event Risk Calendar Wall Street Horizon The Technical Take With shares now undervalued after the massive drawdown over the last few months, I see opportunities on the chart. Notice in the graph below that COIN held its September 2024 low of $146 on a closing basis earlier this month. Now bouncing into the mid-$160s, there remains room to the upside to reach my fundamental target and given what technical patterns show. The long-term 200-day moving average is all the way up at $229, though I don’t like to see the bearish death cross that transpired a few sessions ago. Also, take a look at the RSI momentum oscillator at the top of the chart—it's trending down. I’d like to see a breakout there, along with a price rise to improve the technical situation. For now, though, long with a stop under $140 appears to be a favorable risk/reward strategy. Resistance is found near the 200dma and the range lows from January near $240. This makes me confident that a near-term low is in, as the measured move price objective from the breakdown below the $240 mark was almost perfectly hit (blue lines annotated below). Next support is down at $114. COIN: Key Support at the $142 Level, Eyeing $240 Resistance StockCharts The Bottom Line I have a buy rating on Coinbase. Amid the plunge, I now see the stock as undervalued with more earnings clarity compared to when I last analyzed the stock 14 months ago. With strong sales growth and ample free cash flow, the technicals support the case that a near-term bottom is in.