5 Reasons to Buy the Coinbase IPO 🤔 | Coinbase Stock Price Prediction

<p>Coinbase, the largest cryptocurrency exchange in the United States by trading volume, is going public on April 14th with a valuation of $100 billion. Recent quarterly revenues came in higher than FY2020 revenues at $1.8 billion versus $1.27 billion. Adjusted EBITDA for the quarter came in $1.1 billion, making Coinbase highly profitable <strong>with an EBITDA Margin of 61%</strong>.</p> <p><strong>For context,</strong> 11% of the whole crypto market trades on Coinbase. They have a fast-growing 56M user base and $223B in total assets on the platform. Coinbase recognizes revenue by taking approximately 1.5% of each bitcoin transaction. If Bitcoin's market cap increases, Coinbase's revenue increases by the same %. Therein lies the risk and the opportunity. Coinbase is a pure play on Bitcoin. If bitcoin reaches a price of $300k, then we can assume that their quarterly revenues would be 5x larger (assuming the same EBITDA margin and market share of 11%). Thus, a 5x in Bitcoin would equate to $36 billion in annual revenues and EBITDA of $22 billion, making their $100 billion valuation look more than reasonable. However, that estimate omits the potential of capturing further market share. In 2020, only 4% of their revenues were spent on marketing. In 2021, they are planning on quadrupling the marketing spend, which will help sustain momentum and capture further market share.</p> <p>If you were to factor in cash from their balance sheet and the cash from their IPO, you get a 20-25 EV/EBITDA today. Given the asset class, their 100% yearly revenue growth and marketing plans, I think that this multiple is justified and can sustain itself.</p>