Summary Coinbase's stablecoin revenue has grown considerably in recent years. With institutional adoption on the horizon, the stock has considerable exposure to a new kind of institutional investment cycle, one focused on crypto's payment rails. Trading at only 18x Adjusted EBITDA, (as a run-rate) we think the stock appears quite reasonably priced. We're upgrading COIN to a 'Strong Buy'. Over the last few years, we've put out a number of articles on Coinbase ( COIN ), consistently calling the stock a ' Buy ': Seeking Alpha This is due to the fact that we see the crypto space growing in importance over the next decade, as the ecosystem's overall size, functionality, and accessibility begin to rival the traditional financial system. In the past, part of our bullish thesis has centered around Coinbase’s exposure to Bitcoin ( BTC-USD ) and Bitcoin trading volumes, which have historically made up a large portion of the firm's revenues. It shouldn’t be a surprise, then, that the stock has correlated strongly with Bitcoin's price since IPO: TradingView However, as stablecoin legislation makes its way through US Congress, and we see increased interest from 'traditional' companies in the space, we think the next crypto cycle is already taking shape. In the past, we’ve seen speculative frenzies dominated by meme coins, NFTs, and a fixation on both Bitcoin and Ethereum ( ETH-USD ), perhaps to the exclusion of all else. Now, as decentralized finance apps and stablecoins begin to offer the world new payment rails for stable value exchange, we think COIN's services revenue will begin generating a majority of appreciation for shareholders going forward. Over the last few years, Coinbase has done an excellent job at cutting costs and diversifying its revenue base. Now, with the potential for massively increased institutional adoption, we think COIN's non-transaction revenues will power the stock's next leg higher. It’s true that COIN is expensive on some metrics, but when you break it down, we actually think the market is asking a reasonable price from investors. Today , we'll dive into the company's recent results, explain why we think COIN's diversified revenue should bolster margins and growth, and reiterate the case that we think Coinbase is 'one to own' for the years ahead. Sound good? Let’s dive in. Financials Our last coverage of Coinbase was in October of last year, and so before we dive into the recent updates that have reinforced our bullish view, it’s probably worth covering some of the recent numbers, just to get a sense of where the stock currently sits. In Q4 of 2024, Coinbase reported revenues of $2.27 billion, which represented 138% year-over-year growth. Similarly, the company reported earnings per share of ~$4.68, which came in well above analyst estimates. By all counts, this was a strong corner. In Q1 of 2025, results were a bit weaker, with revenue actually down sequentially, although still up 24% YoY. EPS also missed by quite a large margin: Seeking Alpha However, when you zoom out, much of this EPS volatility has to do with the company's 'Fair Value' mark of its crypto holdings. If you look at Coinbase from a cash perspective, the firm appears to be in a much stronger operating position. Once you strip out depreciation and amortization, stock-based compensation, and gains and losses from the crypto portfolio, adjusted EBITDA for Q1 of this year was down only very slightly YoY, from $1.02 billion to $930 million: 10Q This reflects gaining momentum in the company's EBITDA, which has now — for several quarters — earned at roughly a $1 billion run rate. Annualize this, and Coinbase as a firm — subject to some volatility and trading revenues — is producing roughly $4 billion a year in adjusted EBITDA. Not bad! With some stocks, using adjusted EBITDA can be a tricky measure, but given that the majority of Coinbase's adjustments are correcting for crypto portfolio fluctuations, we think it’s actually a relatively fair representation of what’s going on, 'on the ground'. Frankly, when we first started covering the stock back in May 2023, Coinbase was just turning the corner on revenue diversification and cost-cutting. Now, two years on, the firm is pumping out solid, consistent adjusted EBITDA off the back of a diversified revenue base at the center of the regulated crypto ecosystem. We expect the company to continue making gains as institutional adoption increases. Recently, we’ve seen a number of headlines that bolster our view that increased institutional adoption is on the way. This week, the US Senate recently voted for and passed a bill giving much stronger legal footing to the stablecoin market. This is a big deal, especially considering the bill's bipartisan support. Now, with the stroke of a pen, Donald Trump could turn whatever final bill lands on his desk into a cohesive outline for how modern businesses can actually use crypto payment rails and free themselves from oppressive credit card fees. Additionally, as this legislation has advanced, we’ve seen comments from major retailers like Walmart ( WMT ) and Amazon ( AMZN ) that they’re looking into using crypto payment rails and stablecoins to reduce payment friction and increase profitability. CFOs at other companies may begin seeing the potential benefits of using stablecoins, and we expect Coinbase to garner a majority of this business. Revenue-wise, Coinbase is well-prepared to monetize this opportunity. The company is known for its retail and institutional trading platforms and brokerage capability, but COIN's revenue streams have now diversified to the point that in Q1 of this year, 35% of revenue came from stablecoins, blockchain rewards, interest, and subscription revenues from programs like 'Coinbase One': Seeking Alpha As we see it, COIN has numerous levers to grow from both traditional routes and increased institutional crypto adoption, and the stock should move beyond how many currently on Wall Street see it — as an underperforming Bitcoin wrapper. Valuation So, COIN's financials have improved, and we think the firm has considerable upside in the event of increased crypto adoption through its service offerings. Why does the stock look so expensive? In short, by some metrics, COIN is trading at a heightened multiple. You can see this in the stock's price-to-sales ratio, which stands at around 11x: TradingView There’s no doubt that this is high, both relative to the past , and nominally vs. the market . However, if you look at the company, Coinbase sports considerable operating margins—at least once you strip out the net income fluctuations from the crypto portfolio. In Q1, the firm produced $2 billion in revenue and $930 million in adjusted EBITDA. This is a nearly 50% cash margin. Not only that, but COIN is now producing roughly $4 billion in adjusted EBITDA, with a market cap of $75.2 billion. Broken down like this, the stock is actually trading at an 18x multiple. This appears MUCH more reasonable. We would argue that for a company that has so much potential upside, to such a large potential shift in the way this financial system works, paying 18x adjusted EBITDA appears like an incredibly fair price. Again, if you look at Seeking Alpha's valuation grade of Coinbase, you’ll find the stock's multiples look quite high versus the financial sector: Seeking Alpha In fact, the stock earns an 'F' rating. That said, many of these numbers are skewed dramatically by the 'Fair Value' fluctuations. Additionally, the company's lumpy results and uncertain growth catalyst timings make the stock look expensive. If Coinbase manages to continue growing EBITDA into the future, we think a purchase today at under $300 per share could be incredibly advantageous for investors. When you add up COIN's significant leverage to the next potential crypto cycle along with the diversity of revenue sources, high margins, and relatively attractive price point, we think the stock looks like a 'Strong Buy'. Risks Of course, when it comes to Coinbase, there are some risks to consider. First and foremost, many of COIN's revenues come from transaction fees from retail users. These still make up the lion's share of revenue. This means that a protracted lack of interest in the crypto ecosystem would also likely have a negative impact on Coinbase's revenue picture. This is what we saw in 2021. However, management has — as we mentioned — taken steps to reduce reliance on trading revenues, which, we think, makes the stock appear more well-prepared for an inevitable future slowdown. Additionally, many of the assets that trade on Coinbase’s platform remain without a regulatory framework. This presents a considerable regulatory risk for Coinbase. The stablecoin news is welcome but make no mistake — regulatory risk remains as Coinbase continues to offer altcoins that have (frankly) questionable status as securities. Management has done an excellent job navigating the regulatory storm in the past, but we think that’s possible that risks here could flare back up. This would likely ding the stock, at least in the short term. Summary Overall, though, we think COIN is incredibly well-prepared to capitalize on the next crypto cycle in a way that it hasn’t been able to before. With increased exposure to stablecoin revenues, reduced regulatory risk, and continued EBITDA margin strength, we think Coinbase's organic performance has a great trajectory. Coupled with a multiple that we think appears very reasonable, it’s hard to see the stock as anything other than a ' Strong Buy '. Thus, our rating. Stay safe out there!
