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Proprietary Data Insights Financial Pros’ Top Crypto Stock Searches in the Last Month
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Is Coinbase (COIN) The Best Way To Play Crypto?
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Despite a wider market selloff, crypto prices have held their own. And with Bitcoin prices near record highs, financial pros have turned their sites towards Coinbase (COIN), which has seen a jump in search volume according to our TrackStar data. The company recorded a first-quarter GAAP EPS of $4.40, blowing through the analysts’ consensus of $1.07. However, its stock price declined by 2.5% due to its latest earnings report. The firm continues to navigate operational challenges and heightened regulatory scrutiny. Yet its financial outlook remains optimistic, projecting higher revenues and solid margins. With shares up 361.1% over the last year and the influx of crypto-related ETFs, investors are now wondering if better options exist for taking advantage of the crypto boom. Coinbase’s Business Headquartered in Austin, Texas, Coinbase is a leading player in the cryptocurrency exchange industry. As a remote-first company, it offers a broad range of crypto services, including trading, staking, and secure asset storage. Coinbase’s revenue breaks down as follows:
Subscriptions and services (14% of total revenues) – Comprises custodial fee revenues, earn campaign revenues, interest income, and revenues from Coinbase Cloud and other subscription licenses. In Q1 2024, Coinbase reported a substantial revenue spike of $1.64 billion compared to $953.8 million in the previous quarter. This growth was fueled by a marked increase in transaction volumes, which rose to $312 billion from $154 billion the previous quarter.
Source: Coinbase Investor Relations Despite facing ongoing regulatory challenges, Coinbases’s robust infrastructure and strategic initiatives continue to bolster its position in the digital finance landscape. Even more so now, after the collapse of FTX and the legal issues Binance is facing. Financials
Source: Stock Analysis On November 7, 2021, crypto had a $2.7 trillion market cap. But by November 14, 2022, it dwindled to $830 billion. Coinbase’s business is heavily correlated to the success of the crypto market. For example, in 2021, it had a profit margin of 39.2%, but in 2022 it was -84.9%. Due to increased transaction volume, profit margins have risen nearly 34% over the last twelve months, significantly improving from 2023’s 3.1%. The company’s balance sheet shows strong liquidity, with cash and equivalents rising to $8.14 billion over the last twelve months. However, its liabilities have also increased, including a jump in long-term debt to $4.23 billion. While the firm has plenty of capital for its operations, it faces potential financial risks from its rising debt and heavy reliance on the performance of the crypto markets. Valuation
Source: Seeking Alpha Coinbase (COIN) has a forward P/E (GAAP) of 31.5x, which is better than Block (SQ) at 37.8x and Marathon Digital Holdings (MARA) at 91.5x but not as strong as Riot Blockchain (RIOT) at 16.2x. This indicates Coin has a moderate valuation relative to its peers. The Price to Sales (TTM) ratio for Coinbase, at 14.1x, is higher than MARA’s at 8.3x but not as substantial as MicroStrategy’s (MSTR) at 37.5x, suggesting a premium but less extreme than MSTR. On the EV/Sales (TTM) front, Coinbase’s 13.9x is less than MSTR’s 51.5x but exceeds MARA’s 12.2x, highlighting a balanced high valuation within its peer group. Growth
Source: Seeking Alpha Coinbase showcases strong growth, with a 38.9% revenue increase year over year. This outperforms MicroStrategy’s decrease of 2.5% but trails Marathon Digital Holdings’ impressive 229.1% surge. Looking forward, Coinbase anticipates a 20.8% revenue growth, robust yet below RIOT’s forecast of 50.9% and MARA’s 105.6%. It is important to note that both RIOT and MARA are Bitcoin miners, and how negatively the latest Bitcoin halving will impact their businesses remains to be seen. That said, Coinbase has shown substantial growth in tangible assets, with a three-year CAGR of 224.3%, reflecting significant investments and potential for future revenue realization. Profitability
Source: Seeking Alpha While MARA and RIOT boast impressive EBITDA margins, neither generates cash from operations, a metric in which Coinbase outshines its peers. In addition, Coinbase has a higher levered free cash flow margin at 5.3%. Meanwhile, its peers are negative except for Square, which is at 1.7%, indicating that they are burning cash and in desperate need of financing.
Our Opinion 6/10 Coinbase is probably the best stock if you want exposure to the crypto market. However, as shown in previous years, the business’s health is heavily dependent on the crypto market’s performance, making it a risky investment. Moreover, the influx of crypto-related ETFs gives investors more options if they want exposure to crypto, which might make for a better pure play on crypto, not to mention the company’s constant regulatory scrutiny. |
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