• Bitcoin
  • Blockchain
  • Crypto
  • Metaverse
  • AltCoins
  • Business
  • Investment
  • Upcoming
What's Hot

Buy Love, Sell Fear

October 3, 2023

Elon Musk Calls Fiat Currency A Scam

October 3, 2023

US Government Frames Bitcoin Privacy As “Criminal”

October 2, 2023
Facebook Twitter Instagram
  • Bitcoin

    Buy Love, Sell Fear

    October 3, 2023

    Elon Musk Calls Fiat Currency A Scam

    October 3, 2023

    US Government Frames Bitcoin Privacy As “Criminal”

    October 2, 2023

    Bitcoin Is A Possession, Not Property

    October 2, 2023

    A Most Ridiculous World : The Politicization Of Energy

    October 2, 2023
  • Blockchain

    BlockJoy raises $12M to help cut operating costs for businesses running blockchain nodes • TechCrunch

    February 2, 2023

    Blockchain Futurist Conference — Canada’s biggest crypto conference returns for fifth year

    February 2, 2023

    WEMADE and Metagravity Sign Strategic Alliance MOU to Collaborate on Blockchain Games for the Metaverse

    February 2, 2023

    Will Polkadot’s [DOT] new parachain fix the blockchain?

    February 1, 2023

    BNB Chain Unveils 3rd Blockchain in BNB Ecosystem, Tether ‘Never Borrowed from Celsius’, Ripple Sold $226M Worth of XRP in Q4

    February 1, 2023
  • Crypto

    Crypto Donations Now Need An Appraisal

    February 2, 2023

    Bitcoin Shrugs Off Fed Rate Hike to Hit Six-Month High

    February 2, 2023

    Stock and Share Market News, Economy and Finance News, Sensex, Nifty, Global Market, NSE, BSE Live IPO News

    February 2, 2023

    Yates County cryptocurrency miner completes debt restructuring deal

    February 1, 2023

    How ‘King of Instagram’ Dan Bilzerian ‘made millions’ from cryptocurrency after bizarre poker deal

    February 1, 2023
  • Metaverse

    Facebook’s Metaverse Division Lost Nearly $14 Billion Dollars Last Year

    February 2, 2023

    Samsung Hints Metaverse Ambitions At Product Launch Event, Eyes Integrating Different Realities Into Premium Smartphones

    February 2, 2023

    Sanlam makes history with SA’s first media launch in the metaverse

    February 2, 2023

    Meta’s plans to expand metaverse are up and running again: Here’ how

    February 2, 2023

    RFOX VALT Launches AI-Enabled Metaverse Apartments for Sale

    February 1, 2023
  • AltCoins

    Altcoins Lead Post-Fed Crypto Rally as Risk Appetite Increases

    February 2, 2023

    CAKE, SHIB And These Alt-Coins Are Trending

    February 2, 2023

    Elon Musk Wants McDonald’s to Accept Crypto Payments. Dogecoin (DOGE), Bitcoin (BTC), and Snowfall Protocol (SNW) Benefit

    February 2, 2023

    Crypto Analysts are Saying These Altcoins Have Huge Potential – Here’s Why

    February 2, 2023

    Are Cryptos Bound to Retrace Amid Recent Pump?

    February 1, 2023
  • Business

    Ray Dalio Warns Money Is in Jeopardy, Favors Inflation-Linked Crypto

    February 2, 2023

    BIT Mining Limited Regains Compliance with NYSE Continued Listing Standards

    February 2, 2023

    Bithumb’s de facto owner arrested over alleged embezzlement

    February 2, 2023

    Crypto Custody Firm Copper Alerted to Security ‘Incident’ Over Christmas

    February 1, 2023

    Cathie Wood’s Ark Invest Says Bitcoin Could Hit $1.5 Million by 2030

    February 1, 2023
  • Investment

    The Investor’s Guide to Crypto Options Trading

    February 2, 2023

    Pune software engineer loses Rs 13 lakh to crypto investment fraud

    February 2, 2023

    Crypto Investment Products’ AUM Surges as Investor Confidence Returns: CryptoCompare Report

    February 2, 2023

    Crypto Investors Can Purchase Bankruptcy Put Options to Protect Funds on Binance, Coinbase, Kraken Crypto Exchanges

    February 1, 2023

    Ethereum price forecast for February, including Morgan Stanley comments By Investing.com

    February 1, 2023
  • Upcoming

    S&P 500 rises to the highest level in five months Thursday as Meta leads a tech comeback

    February 2, 2023

    Looking For Something Different From Nubank and C6 Bank? Try Lanistar! – Sponsored Content

    February 2, 2023

    NYDFS Releases Guidance For BitLicensees And Limited Purpose Trust Companies On Asset Custody In The Wake Of Cryptocurrency Insolvencies – Financial Services

    February 2, 2023

    This Supreme Court Case Will Reverberate Throughout the Compliance and ESG World | NAVEX

    February 2, 2023

    Ethereum (ETH) Could Reclaim $2,000, Trader Says

    February 1, 2023
investorstoday.press
investorstoday.press
Home»Upcoming»Coinbase (COIN) Stock: Buy Before It’s Too Late
Upcoming

Coinbase (COIN) Stock: Buy Before It’s Too Late

maikdezana@icloud.comBy maikdezana@icloud.comSeptember 13, 2022No Comments7 Mins Read
Share
Facebook Twitter LinkedIn Pinterest Email

gguy44/iStock via Getty Images

Thesis Summary

Coinbase Global, Inc. (NASDAQ:NASDAQ:COIN) has recently rallied strongly, following positive news and a strong Bitcoin (BTC-USD) recovery. Looking at analyst forecasts, it seems clear that Coinbase is undervalued, which is why I expect it to rally strongly, especially as we enter a new crypto bull market. Even with the regulatory uncertainty surrounding crypto, I am bullish on COIN and calculate its fair value of at least $260.

Quick Overview

Coinbase is one of the largest exchanges in the world. It was founded in 2012 by Brian Armstrong, and it started trading publicly on the Nasdaq in April 2021. This was at the height of stock market valuations, and Coinbase shares began trading at $250, with a valuation of $86 billion.

COIN Price Chart

COIN Price Chart (TradingView)

As we can see in the chart above, Coinbase traded as high as $360 in November but has since fallen considerably together with most Nasdaq stocks. At its lowest, COIN was trading at just over $40. However, we have seen a significant rally in the past month, with Coinbase making headlines for good and bad reasons.

On the unfortunate news side, Coinbase was accused by the SEC of trading unregistered securities. Of course, this debate spills into that of what cryptocurrency is. On top of that, a former Coinbase manager has been accused of insider trading. Allegedly, different wallets were used to purchase tokens before public listings in Coinbase.

While these headlines put a dampener on Coinbase’s price, the stock rallied on news that it was partnering with BlackRock to provide institutional investors access to crypto. Needless to say, this is huge for Coinbase.

In the last few weeks, COIN has rallied strongly as we approach the Ethereum (ETH-USD) merge, which many see as positive news for Coinbase. The company could stand to profit from the staking of Ethereum.

How Does Coinbase Make Money?

Revenue Statement

Revenue Statement (10-K)

As we can see in this extract from Coinbase’s annual report, around 90% of revenues come from transaction revenues, and in turn, most of this comes from retail. Every time you make a transaction, Coinbase takes a small fee, much like a stockbroker or a payment processor. Coinbase also makes some revenue from subscriptions and services like custody.

Coinbase has enjoyed significant revenue growth since 2019, going from $533,735 million to nearly $8 billion in 2021. Granted, this has been during an epic crypto bull run and growth for 2022 will likely be much smaller.

Another important metric for Coinbase is users, which have also grown at a healthy rate:

Coinbase Users

Coinbase Users (10-K)

Monthly transacting users increased by 307%, almost three times as many verified users. This shows the dynamic of retail traders becoming more active during the height of the bull market.

The not-so-secret formula for Coinbase to increase revenues is simple. More transaction users and higher crypto prices go hand in hand.

What About Profitability?

The next natural question to ask is what about profitability?

Income Statement

Income Statement (10-K)

Unlike many growth companies that rely on a high stock based on compensation or have low margins because of high marketing expenses, Coinbase is very profitable. Net income 10-fold from 2020 to 2021. The company had over $4 billion in EBITDA in the last reported year. That puts COIN’s EBITDA margin at 42.45%

This kind of profitability is quite remarkable for a company that is growing so fast, and I would expect such a margin to be sustainable in the long term.

Forecast and Valuation

Those who bought COIN when it IPO’d have faced severe losses, but so has the market. The poor performance in the stock price is not indicative of Coinbase’s future potential and valuation.

Coinbase is the go-to exchange for retailers, and it has so many potential avenues for growth. Institutional trading will surely be a big source of revenue, especially after the BlackRock deal.

On top of that, crypto is an expanding market with many other areas of interest. DeFi, NFTs, synthetic assets. Coinbase is merely scratching the surface.

Now, let’s take a look at the analyst forecasts for Coinbase.

Revenue Estimates

Revenue Estimates (SA)

As we can see, 2022 is expected to be a bad year, with revenues slashed in half. This is possible, given that crypto prices are much lower, and they could still take a few months to recover and even longer to surpass previous highs. However, as we enter a more favourable crypto environment, Coinbase will flourish. Even Wall Street analysts believe that by 2025 Coinbase will have close to $7 billion in yearly revenue. Based on the dynamics of previous Bitcoin cycles, 2025/26 could be the peak of the next bull run, so I’m going to make a valuation for these years.

Below, we can see a 5-year DCF model provided by Finbox.

Valuation

Valuation (Finbox)

I have used analyst estimates as a reference point, though I have been slightly more bullish in my forecast, which has COIN achieving $9 billion in revenues by 2026. This aligns with my belief that crypto prices should surpass previous highs by at least a multiple of 2-3. This is a very conservative estimate, given that Coinbase achieved almost $8 billion in 2021. Once Bitcoin regains new all-time highs and interest picks up, Coinbase should easily exceed its 2021 revenues. Now, I have forecast a substantial margin contraction in terms of EBITDA margin, assuming that competition will intensify.

Even with what I consider to be a moderate forecast, the fair value achieved in this model is $172.4, which implies a juicy +100% upside potential.

Risks

Of course, even with a bullish crypto market, Coinbase faces multiple risks, the most significant of which is regulation. While individual crypto holders can escape regulation to an extent, Coinbase is a listed crypto exchange and is in many ways at the mercy of regulators. We have already seen this with the recent SEC investigation. While there’s no real risk of Coinbase being shut down, the company will likely have to face increased regulatory scrutiny, and compliance with new rules will strain profitability.

On top of that, profitability and growth will also be affected by competition. As crypto enters a new bull run, interest will once again pick up, and with money on the table, new companies and exchanges will be quick to try to offer similar services to Coinbase. One could even argue that decentralized exchanges will likely take over COIN’s market share, but this misses an important point.

Indeed, DEXs are superior to centralized exchanges but are flawed in one fundamental way; onboarding. Crypto veterans assume retailers prefer a decentralized exchange, where you control your keys and may benefit from lower fees. However, for the average crypto newbie, the ease of use that Coinbase provides far exceeds the possible benefits of having your own wallet and controlling your keys, which is a moderately complex process.

This, combined with the fact that Coinbase is already a household name, will be key to the company’s success. People want to invest in crypto but are still very uneasy about it. Investing through a well-known, publicly listed, and regulated company provides the assurance they need to take the leap.

Takeaway

Coinbase is showing solid signs of reversal, and with what I believe to be an upcoming crypto bull market, it could prove to be an excellent investment. It won’t necessarily outperform cryptos, but it is, in my opinion, a great addition to a well-diversified crypto portfolio.

Share. Facebook Twitter Pinterest LinkedIn Tumblr Email
maikdezana@icloud.com
  • Website

Related Posts

S&P 500 rises to the highest level in five months Thursday as Meta leads a tech comeback

February 2, 2023

Looking For Something Different From Nubank and C6 Bank? Try Lanistar! – Sponsored Content

February 2, 2023

NYDFS Releases Guidance For BitLicensees And Limited Purpose Trust Companies On Asset Custody In The Wake Of Cryptocurrency Insolvencies – Financial Services

February 2, 2023

This Supreme Court Case Will Reverberate Throughout the Compliance and ESG World | NAVEX

February 2, 2023
Add A Comment

Leave A Reply Cancel Reply

Top Posts

Subscribe to Updates

Get the latest crypto news

Advertisement
Demo
Top Insights

Buy Love, Sell Fear

October 3, 2023

Elon Musk Calls Fiat Currency A Scam

October 3, 2023

US Government Frames Bitcoin Privacy As “Criminal”

October 2, 2023
Get Informed

Subscribe to Updates

Get the latest creative news from FooBar about art, design and business.

Categories
  • AltCoins (1,399)
  • Bitcoin (2,057)
  • Blockchain (1,384)
  • Business (1,378)
  • Crypto (1,365)
  • Investment (1,383)
  • Metaverse (1,361)
  • Upcoming (1,319)
Facebook Instagram
  • Contact Us
  • privacy policy
  • about us
© 2023 Designed by investorstoday.

Type above and press Enter to search. Press Esc to cancel.