Coinbase (COIN) stock was recently listed in the NASDAQ exchange. On the day of listing, the stock touched a high of $429.
However, the stock has declined and currently trades at $295. I believe that this correction is a good opportunity to accumulate COIN stock.
Let’s talk about eight reasons to be bullish on Coinbase.
Reason One – The number of crypto users crossed 100 million and was at 106 million in January 20121. In July 2020, the number of crypto users globally were 74 million. With the surge in cryptocurrencies, there has been a growing interest among global investors. I expect cryptocurrency adoption to increase at a healthy pace. This is good new for Coinbase.
Reason Two – Coinbase reported 32 million verified users in FY2019. At the end of FY2020, the verified users increased to 43 million. In the first quarter of 2021, the company’s verified users surged to 56 million. With growth in verified users, the company is well positioned to deliver healthy numbers.
Reason Three – Coinbase reported monthly transacting users of 1.0 million in FY2019. At the end of FY2020, the number of monthly transacting users were 2.8 million. Further, as of Q1 2021, the monthly transacting users increased to 6.1 million. As more verified users convert to transacting users, there is big potential for revenue growth.
Reason Four – Coinbase reported revenue of $534 million for FY2019. For the last year, the company’s revenue surged to $1.3 billion. For FY2021, the company has guided for revenue of $1.8 billion. Clearly, the company is on a high growth trajectory and the stock is likely to trend higher.
Reason Five – Coinbase reported EBITDA of $24 million in FY2019. For the last year, EBITDA surged by 2095.8% to $527 million. This implied an EBITDA margin of 41%. For the current year, the company has guided for adjusted EBITDA of $1.1 billion on revenue of $1.8 billion. This would mean an adjusted EBITDA margin of 61%. Therefore, with revenue growth, the company has significantly expanded EBITDA margins. The company is well positioned for strong cash flows in the coming years considering the margins.
Reason Six – As of Q1 2021, the company had $223 billion of assets on the company’s platform. This represented 11.3% of the crypto asset market share. In FY2018, the company’s crypto asset market share was 4.5%. Therefore, Coinbase has increased its market share and with the IPO funding, the company is positioned for further growth in verified users (higher sales and marketing expense).
Reason Seven – As of Q1 2021, the company reported $122 billion of assets on the company’s platform from institutions. With growing interest from global institutions, this is another big revenue source for the company in the coming years.
Reason Eight – 72% of the trading in the company’s platform was related to Bitcoin and Ethereum in FY2019. Last year, the trading on these two cryptocurrencies was 56%. With increasing number of assets supported on the company’s platform, trading volume concentration is likely to be more diversified in the coming years. This will attract a significant new user base.
Overall, Coinbase looks very attractive with high growth likely to sustain in the coming years. I would not be surprised if the stock doubles or triples from current levels in the next 24 months.
References -
https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/50ece2a0-8e87-4471-8df0-ff6fb8d1b19c.pdf
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