Coinbase Stock Price Forecast Ahead of Earnings: Buy or sell?

Coinbase stock price pulled back this week as the recent crypto bull market stalled and as traders started to refocus on the upcoming earnings. COIN dropped for four consecutive days, moving from a high of $445 to $397 today. This article explores whether buying or selling the stock before its earnings on July 31 is safe.

COIN Stock Benefits From the Crypto Market Rally

Coinbase stock price has been in the spotlight in the past few weeks as it benefited from the recent crypto market rally. Bitcoin jumped to a record high of above $123,000, while the market capitalization of all coins crossed the $4 trillion milestone for the first time.

COIN stock thrives when the crypto market is booming for three main reasons. First, it benefits directly when Bitcoin thrives because it is the 12th-biggest corporate Bitcoin holder with 9,267 coins. As such, a higher Bitcoin price directly boosts its holdings.

Second, a crypto market rally leads to more Bitcoin and Ethereum ETF inflows, benefiting its custody business. Coinbase custodial holdings have surged as BTC and ETH inflows rose to over $54 billion and $8 billion, respectively. The company will benefit once the SEC approves other altcoin ETFs this year.

Third, Coinbase stock has benefited from increased volume and transactions as retail and institutional investors participated in the rally.

Coinbase Earnings to be Subdued

However, according to Yahoo Finance, analysts expect Coinbase’s earnings to be subdued because the crypto market remained tight during the quarter.

The average estimate among analysts is that Coinbase’s revenue rose by 11.35% in the second quarter to $1.61 billion. Analysts also anticipate that its earnings per share will move to $1.36.

In most cases, Coinbase stock does not necessarily react to the quarterly results. Instead, its price action will likely depend on the company’s guidance for the third quarter.

Based on the ongoing crypto bull run and its acquisitions of LiquiFi and Deribit, analysts expect its third-quarter revenue to be $1.67 billion, up 38% from the same period last year. Its earnings per share will grow to $1.3 from $0.28 in the third quarter of last year.

The Coinbase stock price will also react to the company’s segment results. Its business is now divided into transactions, subscriptions and services, and corporate interest.

The transaction revenue is the amount of money it makes for processing orders and is its biggest revenue source. However, it also tends to be highly volatile as it is depends on volume and crypto price movements.

The subscription revenue includes stablecoin, blockchain rewards, interest, finance fees, and other subscriptions. This segment is growing and is often more stable. Its revenue jumped to $698 million in Q1 from $510 million in the same quarter last year.

Coinbase’s stock price will likely react favorably if the subscription business continues to thrive.

Further, the stock will react to more details about its partnership with PNC Bank. The partnership, announced on Wednesday, will see the company provide cryptocurrency solutions to PNC’s customers.

Coinbase Stock Price Technical Analysis

The daily timeframe shows that the Coinbase share price has pulled back in the past few days, moving from $445 to $397 today. This decline happened because of the ongoing crypto pullback and as traders took a breather.

Technically, the pullback is also likely because of mean reversion, a situation where an asset falls back to its historical averages.

On the positive side, COIN stock is above the 50-day and 100-day moving averages, and the crucial support is at $347, the upper side of the cup-and-handle pattern, whose depth is 57%.

Therefore, measuring the same distance from the cup’s upper side gives it a target of $542. This means the Coinbase stock will likely rebound and continue rising after the earnings.

The alternative scenario is where it drops and retests the cup’s upper side at $347, and then resume the uptrend. This pattern is known a break-and-retest and is a popular continuation sign.

Coinbase’s stock price has pulled back in the past few days because of the ongoing crypto softness. Technicals suggest the stock still has strong metrics that may lead to a rebound after earnings.