Summary Coinbase has shown a significant rebound, clearing major moving averages, with bullish indicators like the PPO and RSI suggesting a strong setup ahead of earnings. Coinbase's performance is highly correlated with Bitcoin, which is currently in a bullish phase, indicating potential positive outcomes for COIN. Despite stagnant earnings projections, positive revisions and strong subscription revenue growth support a bullish outlook for Coinbase. With a forward P/E of 27X, down from 40X–65X, and the potential for higher margins, I am at a 'buy' rating heading into Q1 results. Crypto exchange giant Coinbase Global ( COIN ) is set to report earnings later this week, and while I haven’t always been the biggest fan of COIN in the past, I’m quite constructive on its setup this time around. This one is extremely volatile and carries with it a lot of inherent risk in both directions. If that’s for you, let’s carry on and take a look. Hard to be bearish on the charts Let’s get going with a look at the daily chart of COIN, which shows a huge rebound off of the panic lows from the “Liberation Day” announcement that sent global risk assets into a tailspin. Since the bottom, we’ve seen COIN add almost half its value in the span of about four weeks, so the rally has been absolutely enormous. StockCharts It’s also cleared both of the major moving averages well and truly turned the 20-day EMA higher. The PPO is back into positive territory for the first time in months, and the RSI is trying to get through that important 60 level. The recovery here has been unbelievable, but COIN was so oversold that the massive rally has simply reset conditions prior to the tariff war starting. What we need to see is the RSI closing over 60 for multiple days, the PPO moving further into positive territory, and for any pullback in the stock to be met positively by the rising 20-day EMA. Is earnings the catalyst for this? Very possibly, but we’ll have to wait and see. For now, I’m quite constructive on this chart and see the bulls as being in control until proven otherwise. Now, I’d be remiss if I didn’t mention Bitcoin because as we can see below, Coinbase’s correlation to Bitcoin is absolutely huge. StockCharts This is a one-month rolling correlation between the two assets, and its current 0.95. That means that for all intents and purposes, we can generally think of Coinbase as a way to gain exposure to Bitcoin. It makes sense in that case that we take a look at the OG alt-coin itself. I have to say that Bitcoin looks quite good right now if you’re a bull. StockCharts Clearing resistance in the low-$90k area was key, but even more importantly, Bitcoin has held that breakout. To be clear, it’s still just back into the trading range of ~$90k to ~$108k, but it spent several weeks below that range, so this is a big improvement. The PPO is rolling over short term but is well into positive territory. The RSI has also spent at least a month over 60, which is extremely bullish. The asset is also above two upward-sloping moving averages. I have no choice but to conclude with this evidence that Bitcoin is mostly likely in another bull phase. If that’s the case, Coinbase and its near-perfect correlation stand to do very well. Let’s now see if the fundamental case supports such a conclusion. Renewed optimism Let’s kick this off with a look at the company’s earnings estimates, as well as the revisions we’ve seen recently. Seeking Alpha This is where the bull case is a bit harder to make, in my view. Earnings are expected to be stagnant between now and 2027, which is hardly a good look for what is supposed to be a growth stock. The thing is that with Coinbase, revenue, and earnings estimates are inherently quite volatile, so we must take these with the proverbial grain of salt. Revisions have been extremely positive, for what it’s worth, with 17 of the last 19 revisions coming in higher. Let’s call that a feather in the cap of the bulls. Last time Coinbase reported earnings , the company issued guidance for a midpoint of $725 million in subscription revenue for Q1, so that’s one target we must assess results against. The other key thing is that we obviously need to see strong trading activity on the platform. But I’m also curious to see how much Coinbase spent in Q1. The company continues to invest heavily in future growth, but that’s expensive to do. The company called for SG&A and R&D of ~$775 million, as well as marketing costs of $325 million to $375 million. Expenses are critical because Coinbase made a habit of spending pretty much all of its gross profit on growing the business, rather than creating short-term profits. At some point, the company has to generate sustainable profits, but leverage from revenue growth is really the only way to get there. Still, total expenses for Q1 are critical, so watch that space. Revenue leverage has to come from transaction revenue, which is still the core part of Coinbase’s business. It’s extremely volatile, and given Bitcoin had a consolidation phase during a lot of Q1, it may be muted this time around. However, looking forward, higher Bitcoin prices are good for Coinbase. Here’s what that looks like in action, as we have quarterly gross profit in green, as well as SG&A and R&D expenses, in blue and black, respectively. TIKR Higher revenue and stable gross margins mean gross profit has been flying higher. That makes it feasible for Coinbase to spend heavily on future growth and see some profits consistently. These are the three things I’m very interested in for Q1 as the change in these numbers will tell us quite a lot. Heading into the report, all looks well. Coinbase’s market share is huge in the crypto exchange space, as it is said to have something like two-thirds of the US market. That means market share gains are likely to be muted, but the scale here is impossible to beat. As the company gradually spends less overtime on R&D, we should see profit margins creep up. The other thing that could help is the increasingly favorable regulatory environment for crypto products. There are stablecoin bills that would allow for digital dollars back by US Treasuries, which is one way institutional investors could be enticed to enter the crypto space. The growth of subscription revenue should also not only see the company produce higher revenue, but subscription revenue carries enormous margins, and predictability. Software companies with such models are often assigned huge multiples by the market, and if Coinbase can make it work, it stands to benefit from both of those things, potentially. There are also more creative ways to maximize Bitcoin exposure, like funds . While Coinbase is spending a ton of money on R&D, the results speak for themselves in terms of innovation, and it’s supportive of the bull case. Heading into Q1 results with a ‘buy’ Let’s finally take a look at Coinbase’s valuation, which is admittedly pretty challenging to interpret given it’s only recently become profitable. TIKR The forward multiple is 27X earnings today, which is well off of the 40X to 65X where it spent most of the last year. We must take this in proper context, in that Coinbase’s profit base is new and still not huge, but growing. In other words, I don’t believe the fair value for Coinbase is anywhere near 40X to 65X earnings. We will have to wait and see what the market does, but I’d guess for now it’s something like 25X to 35X, pending what happens with subscription revenue progress and profit margins. I do feel much better at 27X earnings than I would if it were still 40X, to be sure. For now, I’m quite optimistic heading into the Q1 report. Any earnings report for any company has the potential to see a big move in either direction, and this is no different. So if risk-aversion is your thing, it’s perfectly fine to wait it out and let the dust settle. But if you own Coinbase as a longer-term holding, I think optimism is what the weight of the evidence is telling us today. Based on what we know today, I’m at a buy rating heading into the report.