It’s a huge week for initial public offerings as one of the largest IPOs to date is expected to be priced.
Investors will also get a look at the strength of the U.S. housing market.
Here’s more of what to look for in the week ahead on Wall Street:
Coinbase IPO: What to Know
There is one big IPO expected to price this week.
Coinbase Global plans to launch on Wednesday. It will trade on the Nasdaq under the ticker symbol COIN.
What it is: Coinbase operates a cryptocurrency exchange and digital currency wallets.
Cryptocurrency investors get a one-stop shop for storing, spending and earning more than 40 different cryptocurrencies through the exchange.
The company boasts 2.8 million monthly transacting users and 43 million verified users of its platform.
Coinbase has $456 billion in lifetime trading volume with $90 billion in assets on the platform.
In its S-1 filing with the Securities and Exchange Commission, it had revenue of $1.14 billion in 2020. That was up from $482 million in revenue reported in 2019.
Coinbase’s net income rose from minus-$30 million in 2019 to $322 million in 2020.
It reported an operating income of $408 million in 2020, compared to negative $45.7 million in 2019.
The offering: The company is offering 115 million shares at around $200 per share.
The Coinbase IPO hopes to raise around $23 billion.
According to Renaissance Capital, at the volume-weighted average price, the company would see a market value of $85 billion.
While there are no underwriters on the deal, Goldman Sachs, J.P. Morgan, Allen & Company and Citi are serving as financial advisors.
The skinny: To say the Coinbase IPO will be watched very closely by Wall Street is a gross understatement.
Cryptocurrency prices — especially bitcoin — have been on a meteoric rise over the last several months.
Coinbase’s revenue being tied directly to the price of cryptocurrencies has been a boon for the company.
However, that connection comes with a drawback.
If the price of cryptocurrencies falls, so does Coinbase’s revenue.
Considering the potential volatility of cryptos, it’s a risk investors must consider before buying into the Coinbase IPO.
Deeper Dive: S&P 500 Earnings
This week starts the next quarter of earnings season. Financial companies will kick things off on Wednesday.
Some of the big financial names reporting are:
- JP Morgan & Chase Co. (NYSE: JPM).
- Wells Fargo & Co. (NYSE: WFC).
- Goldman Sachs (NYSE: GS).
- Bank of America Corp. (NYSE: BAC).
- Citigroup Inc. (NYSE: C).
- Morgan Stanley (NYSE: MS).
Rather than dive into one of those companies, I want to look at the overall S&P 500.
Last week, I told you that 60 S&P 500 companies had reported positive earnings-per-share guidance for the first quarter of 2021 already … a record.
The previous record was 57, which was set in the fourth quarter of 2020.
S&P 500 EPS Rallies
This chart shows the as-reported earnings per share of the S&P 500.
Earnings took a significant dip in the first quarter of 2020 but have since rebounded to $32.98 per share — a 177% bounce upward.
The last time the index suffered a fast and furious drop was in 2008 when S&P 500 earnings fell to negative $23.35 per share.
As you can see, the subsequent rally pushed the index to new heights.
It begs the question of whether a similar trend is in the offing.
Research firm FactSet found that estimated earnings growth for the S&P 500 in the first quarter of 2021 is 23.8%. That’s the highest year-over-year earnings growth rate reported by the index since 2018.
While not completely calculated, the bottom-up EPS estimate for the S&P 500 in the first quarter of 2021 is $39.86 — a 20% rise from the last officially reported quarter (quarter three of 2020).
This tells me that companies are feeling very optimistic about the future. Earnings could push back to their all-time highs in the coming quarters.
Money & Markets Week Ahead: Data Dump
On Friday, the U.S. Census Bureau will unveil its March building permits report.
The report counts the number of new building permits issued by the government, and is one of the leading indicators of demand in the U.S. housing market.
Building Permits Slide in February 2021
The number of building permits issued reached a 2-year high in January, with 1.8 million issued.
That fell back to 1.68 million in February, which was still higher than all but two of the last 22 months.
The forecast for March is for 1.75 million new building permits issued.
Earnings Reports
To finish off the Money & Markets Week Ahead, here’s a look at some of the key earnings reports due out this week:
Monday
Aphria Inc. (Nasdaq: APHA)
Mind Technology Inc. (Nasdaq: MIND)
Tuesday
Fastenal Co. (Nasdaq: FAST)
Healthcare Services Group Inc. (Nasdaq: HCSG)
Wednesday
JP Morgan & Chase Co. (NYSE: JPM)
Wells Fargo & Co. (NYSE: WFC)
Goldman Sachs (NYSE: GS)
Bed Bath & Beyond Inc. (Nasdaq: BBBY)
Thursday
Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM)
UnitedHealth Group Inc. (NYSE: UNH)
Bank of America Corp. (NYSE: BAC)
Citigroup Inc. (NYSE: C)
Friday
Honeywell International Inc. (NYSE: HON)
Morgan Stanley (NYSE: MS)
General Electric Co. (NYSE: GE)
That’s all for this week.
Until next time…
Safe trading,
Matt Clark
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Bull & The Bear, as well as the Marijuana Market Update. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.
