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Coinbase Stock: A Relatively Attractive Crypto Bet
Stock Analysis & Ideas

Coinbase Stock: A Relatively Attractive Crypto Bet

Coinbase Global (COIN) is an American cryptocurrency exchange platform. It was founded in June 2012 and is one of the most well-known digital currency wallets in the world. It makes digital currency exchange viable and accessible for everyone by allowing the trading of cryptocurrencies like Bitcoin, Ethereum, and Dogecoin.

In addition to providing investment and trading opportunities, Coinbase serves as a vehicle for merchants and other parties to use cryptocurrencies as payments. Despite cryptocurrency being one of the newest and most volatile forms of investment, Coinbase is exceedingly popular and a great option for both beginners and those who are more experienced.

I am bullish on Coinbase as it has a strong competitive position, a promising long-term growth runway, and attractive valuation multiples relative to the company’s trading history. On top of that, Wall Street analysts are generally bullish on the stock, and the average analyst price target implies substantial upside over the next year.

Strengths

Coinbase isn’t just one of the most popular cryptocurrency exchanges in the world – it’s the first cryptocurrency exchange that went public on Nasdaq. It offers support to more than 100 countries and has over 73 million verified users. In addition to being one of the safest cryptocurrency exchanges available, it has expanded its range of services from trading to include Coinbase Prime, Coinbase Cloud, and Coinbase Wallet.

The company is also keeping up with new trends and innovations in the digital space and plans to launch 24/7 customer support as well as Coinbase NFT. Further expansions capitalizing on retail use include Payroll & Expense Reimbursements and Retail Advanced Trading.

Recent Results

Coinbase’s total trading volume in Q3 of 2021 was $327 billion. This was up from a total of $45 billion in Q3 of 2020. In addition to expanding its retail trading from $18 billion to $93 billion from Q3 2020 to Q3 2021, it also expanded its institutional trading volume from $27 billion to $234 billion.

While the $93 billion total retail trading volume was 36% down from Q2, this was in accordance with the overall trend in the cryptocurrency market. That said, Coinbase expanded on other crypto assets and has evolved to introduce more choices for users. In September 2021, the Assets on Platform reached $255 billion. This was an increase of $75 billion from $180 billion in June 2021.

Valuation Metrics

COIN stock looks attractively priced at the moment. Its forward enterprise-value-to-EBITDA ratio is only 14.6 times compared to its historical average of 20.1 times. Furthermore, its forward price-to-normalized-earnings ratio is 29.3 times compared to its historical average of 38.9 times. 

Long-term, the company has massive growth potential thanks to the immature nature of the crypto economy and the explosion of interest in nonfungible tokens.

Wall Street’s Take

According to Wall Street analysts, COIN earns a Moderate Buy consensus rating based on 13 Buys, one Hold, and one Sell rating assigned in the past three months. Additionally, the average Coinbase price target of $419.64 puts the upside potential at 82.4%.

Summary and Conclusions

Coinbase is an early leader in the crypto economy and enjoys strengths that extend far beyond its large and wildly profitable cryptocurrency exchange business. As a result, it enjoys a lengthy growth runway and comes with less long-term risk than many other crypto exchange companies.

Furthermore, Wall Street analysts are generally bullish on the stock, and the average price target implies that the stock could see massive upside over the next year. On top of that, its valuation multiples look attractive on a historical and absolute basis. As a result, it looks like it might be a good time to add shares.

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