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.
Financial overview on FY2020
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
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)
Gilat Satellite Networks Ltd.
Gilat Satellite Networks Ltd. (NASDAQ: GILT) is a leading global provider of satellite-based broadband communications. The company designs and manufactures cutting-edge ground segment equipment and offers comprehensive solutions and end-to-end services powered by its innovative technology.
FY20 Financial Highlights:
FY20 Income Statement Highlights (Source: Company Report)
Risks: The company witnessed a major setback from its customers during the pandemic, as various clients postponed their capex planning to retain the liquidity levels. Continuation of the above trend would dampen the future order book.
GILT offers integrated solutions to mobility, cellular, residential broadband segments and has clients from Governments and defense segments also. Moreover, the group is marking its presence across the growing clean energy segment, which is a key positive. The company reported a steady cash flow and posted its cash from operations at USD 43.160 million in FY20, higher than USD 34.782 million in FY19. Notably, the company continued its dividend payout amidst the tepid economic scenario, which is note-worthy. The stock is offering dividend yield of ~7.5%, which is lucrative considering the prevailing interest rate environment. On the valuation front, the stock is available at an EV to Sales multiples of 2.8x on TTM basis, which is lower than the industry (Communications & Networking) average of 4.8x. Hence, considering the above rationale, we give a ‘Speculative Buy’ rating on the stock of GILT at the closing price of USD 9.89 on April 16, 2021.
One-Year Price Chart (as on April 16, 2021). Source: Refinitiv (Thomson Reuters)