At the height of the cryptocurrency craze led by frantic trading of the Shiba Inu (SHIB) cryptocurrency, the exchange platform Coinbase (COIN) traded at over $350. A slump in SHIB and Bitcoin sent COIN stock to around $300 last week.
Coinbase has low short interest at 3.1% but its market capitalization is at risk of falling. Its lofty valuations depend on continued volatility in cryptocurrency. The company must also win back investor confidence after posting a Q3 disappointment.
In Q3, Coinbase earned $1.62 a share. Monthly transacting users fell by 16% sequentially to 7.4 million. Trading volume fell to $327 billion, missing the $308.88 billion estimate. The slowing business spooked investors despite the overall year-on-year growth.
Revenue more than tripled (up 315.9% Y/Y) to $1.31 billion. Management did not have the luxury to disappoint investors because the price/sales are over 10 times. Fortunately, summer is seasonally weak for the crypto trading volume. In the next earnings report, expect customer activity to increase and sign-ups to lift Coinbase’s results.
Risk
ARK Invest (ARKK) has a big position in COIN stock. The ETF tends to buy momentum stocks as markets lose interest in them.
Investors seeking a less followed platform could consider Voyager Digital (VYGVF). Voyager grew its assets under management to $4.3 billion, up from $2.6 billion in the prior quarter. Alternatively, wait for Coinbase’s next earnings report before investing in the stock.
