3 stocks with crypto exposure forming price consolidations
April 30, 2021
5 min read
This story originally appeared on MarketBeat
Crypto mania is drawing attention not only to the still booming universe of currencies, but also to stocks like Coinbase Global (NASDAQ: COIN) and Marathon Digital Holdings (NASDAQ: MARA), as well as companies with high crypto exposure, such as MicroStrategy (NASDAQ: MSTR).
Of course, the underlying industry or business case for a business makes a huge difference when selecting investments or trades. If there is an industry-wide slowdown or some sort of economic development affecting a company’s larger environment, the stock itself has a good chance of languishing.
Nor is it necessarily true that every stock in a “hot” industry will be a winner.
There is no shortage of new fintech companies. Of course, companies focused on blockchain and cryptocurrency are one of them.
Bitcoin and other cryptocurrencies haven’t hit their recent highs, but that’s not necessarily a problem for companies involved in various aspects of the crypto industry.
These days, companies that are not involved in crypto mining or trading put a large chunk of their value on crypto. There are several new twists and turns on “crypto exposure,” and investors can probably expect to see more.
Are these actions wise buys or should you avoid them?
Coinbase went public on April 14, using a direct listing, rather than a traditional IPO. Ultimately, for retail investors, it doesn’t matter how you get a company to go public if you’re thinking about buying stocks. Yes, the lack of an IPO can affect the financial structure of the business and its ability to raise capital, but it may or may not affect investors and traders in the future.
The crypto buying app popped up on the day it went on sale, and then immediately retired. This is not at all unusual for a new stock and it does not mean that the listing was unsuccessful.
It shouldn’t come as a shock that the business was profitable in 2020, when people were at home with extra cash from stimulus checks and wanted a slice of the crypto trade.
If there is a blow to the company, prices may fall or investors may deteriorate on ethereum and bitcoin, two popular cryptocurrencies that generate revenue for Coinbase. There is a precedent for this: earnings were erratic in 2019, as crypto prices were volatile.
It’s far too early in the business life as a public enterprise to buy stocks. Let him develop a business history and watch how the business is able to maintain sales and profit growth.
MicroStrategy, which is not a crypto company per se, has a high balance sheet exposure to bitcoin. The company has been the victim of a major ban on investment banks from buying its shares – something you don’t see every day with stocks listed on a major exchange.
Last month, British bank HSBC announced that it would ban clients of its InvestDirect platform from buying shares of MicroStrategy.
Why would it take such a radical gesture? Because he was concerned about the steps CEO Michael Saylor was taking to invest the company’s cash in bitcoin. Not only did the company cash in bitcoin, but in February it issued debt to buy more.
MicroStrategy provides business intelligence and enterprise analytics for use in a variety of industries.
Unfortunately for investors, earnings for the enterprise software company – the part of the business that isn’t betting on Bitcoin – is declining.
So what’s the long term plan here? Other companies, such as Tesla and Square, have also invested heavily in bitcoin. It remains to be seen to what extent companies in other industries will become ‘crypto’ businesses, or whether they will settle down and refocus their attention on their stated business models.
The company reported a loss in the first quarter of $ 11.40 per share after the close Thursday. Adjusted for costs and a one-time gain, the company earned $ 1.54 per share. Revenue was $ 122.9 million.
MicroStrategy is expected to experience a decline in profits of around 32% this year. That, combined with the risky and uncertain nature of his Bitcoin adventures, makes him something to be avoided, for now, anyway.
Cryptocurrency miner Marathon Digital Holdings is forming a correction after retreating from its April 6 high of $ 57.75.
The business has been very busy. Last month he announced a North American mining pool. A crypto-mining pool is made up of miners who share computing power in the mining process. The rewards are also shared among the minors in the pool.
Earlier this month, Marathon said its bitcoin mining capacity increased by more than 100% in the first quarter of the year.
Marathon has had an erratic history of in and out of profitability, which is not ideal when considering an investment.
The fate of the company, at least for now, appears to rest largely on bitcoin prices.
Wall Street is optimistic about the fortune of the Marathon, expect income from $ 2.10 per share this year, a change of direction after four years of losses.
Featured article: Why do companies issue stock splits?