Coinbase: Strong Growth Opportunities Ahead

Summary

• Coinbase has a strong balance sheet with $6.4bn in cash and $3.5bn in retained earnings as well as attractive gross and profit margins of 86% and 40% respectively.
• It heavily invests in its institutional offering which should diversify its revenue stream over time and suppress the stock’s volatility.
• Its TAM is expected to grow at a CAGR of 18%, but there are prospects to capture the market share of other assets.
• It generated FCF of $2.8bn for the first nine months of 2021 and the FCF model based on conservative assumptions indicates the stock is undervalued by 80% at the current market price of $200.

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Investment Thesis

Despite high volatility and increasing competition in the crypto exchange space, Coinbase (NASDAQ:COIN) presents an exceptionally good opportunity

Analyst’s Disclosure:I/we have a beneficial long position in the shares of BTC-USD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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