Coinbase Global Inc
Coinbase Global Inc (NASDAQ: COIN) is a provider of end-to-end financial infrastructure and technology for the crypto economy. It generates substantially all its net revenue from transaction fees from trades that occur on its platform. Geographically, it derives a vast majority of revenues from the US followed by the rest of the world.
Key highlights
Source: Company
Financial overview on FY2020
Source: Company
Risks associated with investment
The company generates all of its net revenue from transaction fees from trades that occur on its platform; hence, the significant risk of technological change arises. The cryptocurrencies are considered highly volatile, and any fall in these currencies might dampen the overall value of client’s assets, which may result in lower revenue for the group.
Valuation Methodology (Illustrative): EV to Sales
Note: All forecasted figures and peers have been taken from Thomson Reuters
Stock recommendation
The company expects meaningful growth in 2021 driven by transaction and custody revenue, given the increased institutional interest in the crypto asset class. However, its institutional revenue is inherently unpredictable. Moreover, to scale its operations and to continue to drive product innovation, the company expects its technology and development expenses and general and administrative expenses to be in a range of USD1.3-1.6 billion for FY2021. Furthermore, the company got recently listed, and we are not sure of its operations and margins as it has a limited historical financial number. We have valued the stock using EV to Sales based valuation metrics and arrived at a target price offering a lower double-digit downside potential (in % terms). Therefore, we recommend an “Avoid” rating on the stock at the closing price of USD 342.0 as of April 16, 2021. We have considered Intercontinental Exchange Inc, Nasdaq Inc and CME Group Inc etc., as a peer group for the comparison purpose.
1 Year Daily Price Chart (As on April 16, 2021) Source: Refinitiv (Thomson Reuters)
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