I am bullish on Coinbase Global , Inc. (NASDAQ:COIN), due to its attractive valuation and strong long-term growth potential.
Coinbase is a popular cryptocurrency exchange platform based out of San Francisco, California. It offers users the ability to buy and sell Bitcoin, Ethereum, and Litecoin. In addition to its trading platform, Coinbase also offers numerous ancillary services, including cybersecurity storage services.
Coinbase was started in 2012 with the goal of making it easy for anyone to get into Bitcoin by working as a wallet service provider. The company has raised millions of dollars in venture capital from various investors. (See COIN stock charts on TipRanks)
Strengths
Coinbase is a secure, easy-to-use digital wallet that allows you to send and receive cryptocurrencies. Coinbase also provides an API, making it one of the most popular Bitcoin platforms on Earth.
What makes Coinbase stand out from other competitors in the industry are its security measures, ease of use, regulatory compliance, legal status, and popularity among customers worldwide.
Recent Results
Overall, the second quarter was strong for Coinbase. The retail monthly transacting user (MTU) count grew to 8.8 million, a 44% increase quarter-over-quarter. Verified users overall came in at 68 million.
Coinbase also has 9,000 institutions involved on the platform, and 160,000 partners using COIN tools to interact with customers.
Net revenue was $2 billion, which included $1.9 billion in transaction revenue and more than $100 million in subscription and service fees. Coinbase’s net income was $1.6 billion, while adjusted EBITDA was over $1.1 billion.
Coinbase's forward EV/EBITDA multiple is 19.3, and its forward EV/Revenues multiple is 8.5. For a company with $4.4 billion in cash on hand, network and early mover advantages, and impressive long-term growth potential in a cutting-edge sector, Coinbase certainly looks reasonably priced.
Wall Street’s Take
From Wall Street analysts, COIN comes in as a Moderate Buy, based on 11 Buy ratings, three Hold ratings, and one Sell rating in the past three months. Additionally, the average COIN price target of $355.54 puts the upside potential at strong 31.7%.
Summary and Conclusions
Coinbase had a strong second quarter, showing that its profitability can continue to grow, even during a period where overall cryptocurrency prices were on the decline.
Furthermore, the company continued to diversify away from an overreliance on Ethereum and Bitcoin, and also grew its institutional ancillary services business, strengthening its profitability and moat.
Coinbase is likely to continue generating strong growth over the long-term, though results will likely be choppy in the short-term. Its attractive valuation and bullish Wall Street sentiment combine to make it a potentially opportunistic time to buy the stock.
Disclosure: On the date of publication, Samuel Smith had a long position in COIN.
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