To be a successful trader, it’s key to be able to separate hype from substance.
Trust me: None of us are born with the ability. We need the discipline to crunch the numbers.
And speaking of hype, it’s been a little over a year since leading crypto exchange Coinbase (Nasdaq: COIN) went public in one of the most anticipated IPOs in recent history.
I wrote about this last April, advising that we wait and see before buying Coinbase shares.
My analysis showed that it generally worked to an investor’s favor to sit out the initial IPO and wait for the shares to either rise or fall by 50%.
Sure, a bracketed strategy like this means that we miss out on the initial gains of a successful IPO.
But it also means we avoid the nasty losses of the ones that bomb. And in my analysis I found that this approach boosts overall returns by about 27%. (I recommend you go back and reread the analysis because it applies to future IPOs!)
Well, as I write this, Coinbase is down by more than 60% from its opening IPO price. It’s sunk two-thirds from its all-time highs.
It’s safe to say the shine is off this one.
But after the tumble, are the shares worth a look?
COIN Stock Ratings
After all, cryptocurrency as an asset class is here to stay (more about that below) — and Coinbase is the most popular medium to buy and sell it.
Let’s give it a look through the lens of my proprietary Stock Power Ratings.
At first glance, the numbers suggest you should run away screaming!
The stock rates a Bearish 25 out of 100 overall. But is any actionable data buried in the details?
Here’s a deeper dive:
Quality: Coinbase rates well on our quality factor at 85. We base this factor on profitability, and Coinbase enjoys margins that would make traditional banks or brokerage houses blush with envy. For the moment, COIN is a money-minting machine.
Growth: Coinbase rates a respectable 60 on our growth factor. It rates a perfect 100 on its five-year compound annual earnings growth rate subfactor. Crypto is still in its infancy in terms of broad public acceptance. Don’t be surprised to see Coinbase’s factor rating here rise with time.
Value: After losing nearly two-thirds of its value, Coinbase now trades at a reasonable price, reflected in its rating of 53.
Volatility: Our volatility factor hammers Coinbase with a rating of 6. Remember: The lower the score here, the more volatile the stock is. Given the volatility of cryptocurrencies, I’m not shocked that COIN’s share price is volatile as well. That said, the stock’s decent quality, growth and value factors mitigate some of the risk.
Bottom line: A year after my initial guidance to wait for a 50% pullback … is COIN a buy?
Not yet. I don’t like trying to catch a falling knife. I’d like to see the momentum score improve before I’d consider buying shares of COIN.
New Buy Alert: Greatest Crypto Investment in History?
Instead of Coinbase stock, I know some of you have asked us for crypto trades. Look no further than my friend — and Banyan Hill’s crypto expert — Ian King.
When Ian recommended Binance on May 4, 2020, he knew it’d soar higher … and sure enough, it went up 1,061%.
When he recommended Solana on December 17, 2020, he knew it’d soar … and it did by 1,934%.
And when he recommended Terra on December 17, 2020, it went up 18,325%.
What’s most amazing of all? These gains came within a year.
Folks, Ian just issued a new “buy alert.”
He calls this one “the greatest investment in history,” adding: “All my data is clear. It will be 20X bigger than bitcoin.”
And you have the rare opportunity to get in before it starts to move higher.
To good profits,
Chief Investment Strategist