Coinbase (NASDAQ: COIN) went public in a highly anticipated debut on April 14 this year. This public debut was particularly exciting as many analysts are currently using the company as a gauge for overall investor interest in the crypto market, with many classing this as a watershed event. There is no denying that cryptocurrencies have surged in popularity, thus, as the first full crypto business to go public, Coinbase is an interesting stock to look at.
So here are the reasons why this is the one crypto stock I am buying right now.
A look at Coinbase’s financials
Coinbase’s revenue mainly comes from its transaction fees and storage services. Indeed, around about 90% of its revenue came from those streams alone in 2020. In its most recent earnings report, the company did miss its targets by a small margin, however, its earnings were solid enough that investors were not too panicked.
Its earnings per share came in at $3.05, whilst it brought in $1.8 billion in revenue, up 307% from the previous quarter and up 842% year-over-year.
Coinbase currently has 56 million verified users and in the most recent quarter, its monthly transacting users more than doubled from the previous quarter; from 2.8 million to 6.1 million.
Looking forward, the crypto platform did not provide any concrete guidance for Q2 or 2021 as a whole, citing unpredictability in the market. However, it does expect monthly transacting users to come in between 5.5 million and 9 million for 2021.
These financials have led many investors to compare Coinbase with Jack Dorsey’s Square.
What I like about Coinbase
Coinbase is essentially legitimizing the crypto business beyond what Tesla and PayPal have already done. Indeed, with Bitcoin prices stabilizing the company has a great chance of building upon its success as the platform that offers the most variety in cryptocurrencies. The platform has even just added Dogecoin to its list of cryptocurrencies available.
Currently, as China carries out its crackdown on crypto mining and trading, plus the more aggressive stance that the U.S. Feds have taken, investors and brokerages alike are looking at Coinbase as a more valuable asset as its regulated nature make it a somewhat safer bet.
Throughout 2020 sales more than doubled, the expectation for this year is that they will grow fourfold again. Factored into this growth is the volatile and cyclical nature of crypto trading revenues, meaning investors who are worried about short-term volatility only need to wait it out. The crypto market is looking quite stable at the moment and Coinbase is hoping to use this current bitcoin stability to focus on providing blockchain infrastructure. Its recent acquisition, Bison Trails, a blockchain infrastructure platform, will allow it to do this on a larger scale.
Coinbase also has a range of services that includes both retail and institutional customers. Its reputation is one of transparency and security. If it continues to remain reliable in the future, then this company has the potential to be a huge Fintech disruptor.
Risks to Coinbase’s share price
Coinbase is a novelty right now and as such its share price is elevated. Over time, industry pricing and thus, Coinbase’s pricing may be depreciated as platforms such as PayPal, Cash App, and even the likes of Tesla integrate crypto alongside their other revenue streams. Coinbase, unfortunately, relies on cryptocurrency as its main source of revenue and it will struggle to compete in the long run.
Coinbase’s growth potential
You’re probably wondering if Coinbase is a good investment now? Coinbase has the potential to become the go-to platform for bitcoin and other cryptocurrencies. With its business transparency and security, as well as its range of services catering to retail and institutional customers alike, Coinbase is on track to be a huge disruptor in the fintech industry.
Any investment in this company would definitely be a long-term bet, but, beyond any short-term volatility, it has the potential to go far.
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Contributing Writer at MyWallSt
Poppy likes companies that go the extra mile. Her favorite stock is Amazon because she is fond of its innovation, variety, and creative solutions to sustainability.