More than 900 exchange-listed stocks hit 52-week highs last week, but that doesn't mean that every quality growth stock is riding high right now. There are some pretty great companies trading at serious discounts from their recent peaks.
Coinbase (COIN 4.68%) and Tesla (TSLA 1.85%) are down by 44% and 31%, respectively, from their highs, and they're two of the top stocks you can buy on sale now.
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The bull case for Coinbase
You don't need to know the difference between blockchain and a chain of blocks to ride the booming popularity of cryptocurrencies. Coinbase is the leading trading exchange for digital currencies, making it a smart way to bet on the success of all types of cryptocurrencies instead of just snapping up the tokens of specific contenders.
Coinbase hit the market via a direct listing at a reference price of $250 on April 14 -- a moment when the buzz around cryptocurrencies had reached a fever pitch. The debutante opened at $381 and hit an intraday high of $429.54. But in the weeks since, the stock has come all the way down to just below its initial reference price, closing Tuesday 44% below April's intraday high.
Two things weighing on Coinbase right now are the sharp correction in most cryptocurrencies that has occurred in the last month, and the platform coming under fire for its high fees. May was a rough month, but one can also argue that volatility is an asset exchange platform's best friend. Coinbase charges 1.49% on many retail trades, and those fees naturally add up for folks who have become spoiled by commission-free stock trading. There are plenty of smaller exchanges -- including Coinbase's own advanced Coinbase Pro -- that take lighter cuts of their clients' transactions.
With 261.9 million fully diluted shares outstanding as of mid-May, Coinbase commands a market cap of nearly $63 billion. Don't fall for the lower share counts you'll see on stock quote pages that use the weighted share count at the end of the first quarter -- before the platform went public. The good news is that there's a lot of money being made here. Coinbase had 56 million verified user accounts as of the end of March, and they conducted $335 billion in trades through just the first three months of this year.
Coinbase generated $771.5 million in net income and $1.12 billion in adjusted EBITDA in the first quarter. If it's able to maintain that pace for the balance of the year -- a dangerous assumption, since the real results will likely be much higher or much lower than that -- that would give it $3.1 billion in earnings and $4.5 billion in adjusted EBITDA. At that hypothetical run rate, Coinbase is trading at 20 times earnings and 14 times adjusted EBITDA -- bargain valuations for a company that has seen its platform's transaction revenue soar ninefold over the past year.
The risks are high, but if you're dabbling in cryptocurrencies, you already have skin in this game. Coinbase may have to cut its transaction fees as the marketplace grows more competitive, but it remains a compelling way to play the entire cryptocurrency market.
Why Tesla stock is a buy
There aren't many stocks as polarizing as Tesla, nor many CEOs as polarizing as Elon Musk. Tesla bulls swear by the company's game-changing electric vehicles. Bears will counter that everyone is jumping into the EV market, and it doesn't make sense for Tesla to trade for half of the enterprise value of the world's four most productive automakers combined.
The valuation the market is placing on Tesla isn't going to make a lot of sense for a company that delivered just 184,800 cars in its latest quarter. And some of the rosy projections -- like the one from USB analysts, who forecast that come 2025, it will sell 2.3 million vehicles and earn an operating profit of $20 billion -- may ring hollow. However, its lead in the electric vehicle market is underestimated by the boo birds.
The bullish case for Tesla is louder than you might think. Its run at an owner's pocketbook doesn't end with the car sale, nor with the subsequent service and repair appointments. It has an unmatched proprietary network of charging stations -- 25,000 Superchargers (and counting). I charged my car at a mall on Monday that had 36 Tesla charging stations. Everyone else is just at the mercy of partnerships with third-party charging specialists. Can you imagine buying an automaker that also profits from every visit you make to the gas station?
The company's self-driving tech is coming under fire these days, but it also has a jump on the competition. Whether you pay $10,000 in a lump sum to upgrade your car's Autopilot into "full self-driving" mode -- or opt for the upcoming monthly subscription plan -- Tesla will get you eventually as autonomous driving rolls closer to reality. Customers who pay for high-margin over-the-air updates, like the $2,000 option for a boost in acceleration, give it incremental revenue levers that just aren't available to legacy automakers. There's a deeper ecosystem beyond EVs and solar panels at Tesla, and right now, it's on sale.
