New IPO Coinbase (COIN) closed at $328.28 per share after direct-listing on the Nasdaq Wednesday — and the stock’s run may not yet be done. In a note initiating coverage of the cryptocurrency exchange stock Thursday, BTIG analyst Mark Palmer made the case for Coinbase stock reaching $500 a share within a year (nearly 50% upside) — and for several specific reasons. (To view Palmer’s track record, click here)
If you haven’t heard of Coinbase, a brief introduction is in order. Palmer describes the company as “the most popular consumer-facing cryptocurrency exchange in the U.S.,” enabling ordinary investors (and traders) to buy and sell Bitcoin and similar cryptocurrencies on its platform. It’s also one of the three biggest such exchanges in the world. Contributing to the company’s popularity is the fact that Coinbase has never been hacked, giving it a reputation as a “safe harbor among crypto exchanges” — not all of which can make the same claim.
Just how popular is Coinbase? A few facts and figures should illustrate. Coinbase boasts:
$223 billion in crypto assets stored on its platform through the end of Q1 2021. That’s 11.3% of all cryptocurrencies in existence currently, and triple the cryptocurrency market share that Coinbase possessed three years ago.
The company had 56 million “verified users” at the end of Q1 2021 notes Palmer, up 30% from the end of Q4 2020. What’s more, the number of “monthly transacting users” (i.e. verified users who actually placed trades on the platform)at Coinbase more than doubled to 6.1 million over the past three months.
So in addition to storing value on the platform, traders are also using Coinbase more actively. In a Q1 2021 estimated earnings report released April 6, Coinbase revealed that its revenues were $1.8 billion for the quarter, which was more than the company’s revenue for all of fiscal 2020. Trading volume also appears to be accelerating, up nearly four-fold sequentially to $335 billion in just the three months from Q4 2020 to Q1 2021. And Coinbase is already a profitable operation.
As Palmer points out, the company earned $322.3 million in 2020, and earned an operating profit margin of 32% — even more than traditional stock exchanges such as Nasdaq (16% operating margin) or the NYSE’s parent company ICE (25%) get. And Coinbase is growing dramatically more profitable as time goes by. In Q1 2021, for example, revenues are estimated to come in at $1.8 billion, and net income at anywhere from $730 million to $800 million. If that’s how things play out, Coinbase could earn a net profit margin as high as 44%.
When you consider that revenues are expected to more than quadruple this year (says Palmer) to $6.1 billion, merely maintaining that level of profitability could result in net income of more than $2.7 billion this year. On a $60 billion market capitalization, that implies a P/E ratio of only 22.2 — which actually seems pretty cheap for a company growing as fast as this one appears to be doing.
Unsurprisingly then, Palmer thinks you should buy it.
Coinbase has unanimous support amongst Palmer’s colleagues. COIN’s Strong Buy is based on 4 Buy ratings. With a $536 average price target, the analysts expect shares to rise by 58% over the coming months. (See COIN stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.