Coinbase(COIN:NSD) and the 2TM acquisition

STA Research
by: STA Research

Coinbase and the 2TM acquisition: The Importance in the Cryptocurrency Market

Coinbase (COIN:NSD) Company Profile

Coinbase Global, Inc. is a financial technology and infrastructure company that serves the crypto-economy in the United States and around the world. Retailers can use the company’s primary financial accounts in the crypto-economy; institutions can use a marketplace with a pool of liquidity to transact in crypto assets, and ecosystem partners can use the company’s technology and services to build crypto-based applications and securely accept crypto assets as payment. Coinbase Global, Inc. is based out of  Wilmington, Delaware, and was founded in 2012. 

The news of the acquisition of 2TM by Coinbase has given investors new hope as a new bullish sentiment has emerged on the stock as the company has  almost finalized  the purchase of 2TM. 2TM  is a major cryptocurrency player in Brazil, and has a strong presence throughout South America. The acquisition should be concluded by end of April.

2TM owns Brazil’s largest cryptocurrency exchange, Mercado Bitcoin. Once the purchase happens, Coinbase will own the most popular crypotcurrency in South America and solidify Coinbase’s dominance in this space. The Mercado Bitcoin has been rising in popularity recently, and sources claim the corporation cleared 3.2 million transactions in 2021 and added 1.1 million new customers in the year. Last year, Mercado Bitcoin ‘s revenue topped $7.1 billion, which provides Coinbase a massive expansion of it’s network, and a lot of additional users to sustain it’s current growth projections.  Furthermore, 2TM also has interest in Meubank, Bitrust, Blockchain Academy, Portal do Bitcoin, and several other companies. 

Stock Analysis for Coinbase

Coinbase finished 2021 on a sour note, which carried into January 2022. During the slump in the stock price,  hedge funds decreased their holdings in the company and helped continue the downwards trend in the company’s valuation.  The stock finally bottomed on March 14th, and since then the company’s stock has staged a rebound, and has surged over 30 percent as it works on a new bullish leg higher.

The average analyst target price for Coinbase Global Inc over the next 12 months is USD 326.91, based on 14 analyst forecasts. The average analyst recommendation for Coinbase Global Inc is a Strong Buy. Coinbase Global Inc’s stock analysis by Stock Target Advisor is Bullish, with 9 positive signs and 2 negative signals. Coinbase Global Inc’s stock price was USD 201.41 at the latest close. The stock price of Coinbase Global Inc has changed by +13.91 percent in the last week, +5.58 percent in the last month, and 0 percent in the last year.

Based on the Coinbase Global Inc stock forecasts from 14 analysts, the average analyst target price for Coinbase Global Inc is USD 326.91 over the next 12 months. Coinbase Global Inc’s average analyst rating is Strong Buy. Stock Target Advisor’s own stock analysis of Coinbase Global Inc is Bullish , which is based on 9 positive signals and 2 negative signals. At the last closing, Coinbase Global Inc’s stock price was USD 201.41. Coinbase Global Inc’s stock price has changed by +24.60% over the past week, +10.64% over the past month and +0.00% over the last year.

What we like:

High market capitalization

This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.

Underpriced compared to earnings

The stock is trading low compared to its peers on a price to earning basis and is in the top quartile. It may be underpriced but do check its financial performance to make sure there is no specific reason.

Superior return on equity

The company management has delivered better return on equity in the most recent 4 quarters than its peers, placing it in the top quartile.

Superior capital utilization

The company management has delivered better return on invested capital in the most recent 4 quarters than its peers, placing it in the top quartile.

Superior return on assets

The company management has delivered better return on assets in the most recent 4 quarters than its peers, placing it in the top quartile.

Positive cash flow

The company had positive total cash flow in the most recent four quarters.

Positive free cash flow

The company had positive total free cash flow in the most recent four quarters.

Underpriced on free cash flow basis

The stock is trading low compared to its peers on a price to free cash flow basis and is in the top quartile. It may be underpriced but do check its financial performance to make sure there is no specific reason.

Superior Earnings Growth

This stock has shown top quartile earnings growth in the previous 5 years compared to its sector.

What we don’t like:

Overpriced compared to book value

The stock is trading high compared to its peers median on a price to book value basis.

Highly leveraged

The company is in the bottom half compared to its sector peers on debt to equity and is highly leveraged. However, do check the news and look at its sector and management statements. Sometimes this is high because the company is trying to grow aggressively.

 

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