00:00:00
is coinbase a buy at $200 per share and
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if you want to build indestructible
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generational wealth is coinbase a good
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choice as a long-term investment the
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only way to know is via fundamental
00:00:10
analysis to find the intrinsic value I
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spent the last week putting together a
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full fundamental analysis of coinbase
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based on their recently reported 2024
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results coinbase is a potential tactical
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investment and at $24 per share I have a
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sell rating on the stock in my research
00:00:26
I discovered five things that got me
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very excited and four Flags to watch out
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for so what did I discover what is my
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value for coinbase stock and what is an
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ideal entry point should you decide to
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become a coinbase shareholder let's dive
00:00:39
in find out in this video I will cover
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coinbase's recent results and what
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everyone is missing what I think about
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coinbase stock and what my analysis
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uncovered what Wall Street Smart money
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says and how it can impact your
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portfolio and how you can use this
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information to build wealth and what you
00:00:54
must do if you decide to buy are you an
00:00:56
investor in coinbase stock why or why
00:00:58
not let me know in the comments below
00:01:00
coinbase recently released 2024 results
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and it was a banger if you're enjoying
00:01:04
this please smash that like button let's
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cover the red flags first 61% of its
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revenues still come from Trading fees
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making it vulnerable to crypto Market
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downturns the good news is that is down
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from 87% of total revenues only 4 years
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ago the company's performance is highly
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sensitive to the unpredictable swings in
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crypto asset prices which could trigger
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short-term losses a quick look at the
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revenue Over The Last 5 Years looks like
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a heart monitor signaling the volatility
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of crypto a heavy Reliance on major
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cryptocurrencies like Bitcoin and
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ethereum means any significant downturn
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in these markets May adversely impact
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revenues the good news is that this has
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been decreasing over time to from over
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70% in 2019 down to 44% in 2024 the
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emergence of decentralized and
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non-custodial platforms poses an ongoing
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threat to coinbase's market share here's
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what got me really excited as one of the
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most trusted names in crypto coinbase
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benefits from strong brand recognition
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and a loyal customer base significant
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investments in cyber security and
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Regulatory Compliance provide a
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Competitive Edge in an increasingly
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scrutinized Market coinbase is no longer
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just a crypto exchange it's evolving
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into a full stack Financial
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infrastructure provider with products
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across custody staking derivatives Prime
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financing and base its L2 platform 75%
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of global crypto volume is derivatives
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but less than 5% of that happens in the
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US coinbase is working to change that
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CFO Alesia calls this a game changer for
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both us retail and institutional clients
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coinbase's total legal Victory against
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the SEC no fines no business changes
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dismissed with prejudice is now a major
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credibility and branding asset coinbase
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was part of the first ever White House
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crypto Summit attended by the president
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and Senior cabinet officials and the US
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is creating a strategic Bitcoin Reserve
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sourced from confiscated Bitcoin CDP or
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the coinbase developer platform is
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letting thirdparty companies integrate
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crypto custody payments staking and
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trading via apis this is what everyone
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is missing while less than 10% of
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revenues only a few years ago
00:03:09
International markets now represent 19%
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of total revenue up 16% year-over-year
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coinbase is now the number one crypto
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app in Brazil markets like Singapore
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Australia and Canada are already paying
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for themselves within 2 years of launch
00:03:23
this has given coinbase confidence to
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expand into new high growth markets in
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2025 hubba hubba H money money money who
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do you trust when it comes to any stock
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I let the numbers tell the story and
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that involves looking at the company's
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financial statements would you buy a
00:03:39
house without knowing the size location
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Dimensions or condition that is what you
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are doing when you buy a stock without
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understanding the three financial
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statements if you want to Value
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companies like the world's top financial
00:03:49
analyst on Wall Street check out my
00:03:51
school Community win likee Wall Street
00:03:53
just scan the QR code on the screen the
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balance sheet shows us how the business
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is funded if assets grow faster than
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liabilities Equity increases and we win
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coinbase has some very unique debt
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features and I can't wait to show you
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coinbase has 8.6 billion of cash and
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cash equivalent and with this cash they
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are actively scaling Prime financing
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institutional lending considering
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opportunistic Equity repurchases under
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their 1 billion Sherry purchase
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authorization approved in October 2024
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and deploying Capital to International
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expansion and Acquisitions routine
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learnings is positive which is a
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pleasant surprise for an early stage
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growth company first the company pays no
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dividend second net income has been
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positive four out of the last 6 years we
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will see this next in the income
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statement while the company has 4.2
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billion of debt it is a very unique
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structure 2.5 billion or 60% of the debt
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consists of convertible notes and these
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notes have pick or paid in kind not cash
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interest this interest adds to the
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balance but is not a cash outflow which
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gives the company more financial
00:04:53
flexibility so what's the takeaway
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coinbase is an early stage growth
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business with a conservative balance
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sheet a stockpile of cash manageable
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debt and a promising future the income
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statement shows us if the company is
00:05:04
generating profits we want to see
00:05:05
revenues grow faster than expenses which
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will grow profits the way we determine
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how effective a company is at generating
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profit is via margin revenues minus
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expenses equals income income over
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revenues equals margin if a company has
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higher revenues and lower expenses it
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will have higher margins if revenues
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grow faster than expenses margins will
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get bigger or expand which is what we
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want to see revenue is very choppy which
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leads to volatility if a 500% increase
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during the covid Boom the next 2 years
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of crypto winter resulted in a 60%
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decline only to be followed by Revenue
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more than doubling in 2024 gross profit
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is positive and growing despite the
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volatility and revenue gross margin has
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remained above 80% with a 5-year average
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over 85% and this shows they are
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managing transaction expenses
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efficiently whenever we see a big number
00:05:52
that's out of the ordinary like here we
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need to dig into the financials as we
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can see here they gained over 687
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million from crypto investments in 2024
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while coinbase is a brokerage and they
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make money when we buy and sell crypto
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they benefited significantly from
00:06:07
holding crypto in 2024 be careful
00:06:10
because this is a double-edged sword
00:06:12
that cuts both ways so what's the
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takeaway we see positive e and net
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income which is very promising but we do
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see a lot of volatility and we need to
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keep an eye on that moving forward the
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cash flow statement tells us where the
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cash is generated by the company and
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there are three buckets operating which
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is the cash the company generates
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internally investing which is the cash
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demanded for long-term growth financing
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which is the cash the company generates
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externally when we add these together we
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get the net change in cash we want to
00:06:38
see companies generating cash making
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this positive not losing cash which
00:06:42
would make this negative while free cash
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flows nearly tripled from 20123 to 2024
00:06:46
we see the volatility over time this
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gives us less certainty when we project
00:06:51
our cash flows capex is very reasonable
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and steady which makes sense for a
00:06:54
service business capex does not vary
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based on the volatility of the cash
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flows and is the main reason that there
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isn't more volatility in free cash flow
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the company has consistently issued
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Equity through its existence while the
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biggest Spike was in 2021 as a result of
00:07:09
the IPO investors need to keep an eye on
00:07:11
this because as Equity gets issued their
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ownership is being watered down and
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reduced without many realizing it so
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what's the takeaway while operating and
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free cash flow are generally positive we
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need to be mindful of the volatility and
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we want to see the company eventually
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sell funding without the need for new
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debt or Equity so what does this all
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mean for the valuation of coinbase stock
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let's cover that next wait is over on
00:07:35
Wall Street we build a discounted cash
00:07:36
flow or DCF model to measure the
00:07:38
intrinsic value of companies because
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companies generate cash flows and we
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projected the three financial statements
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we could take those future cash flows
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discount them back to today to get a
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current intrinsic value of the company
00:07:49
we cannot do this type of valuation with
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crypto baseball cards or art because
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they have no cash flows if you want to
00:07:54
learn how to Value companies like we do
00:07:56
on Wall Street so that you could build
00:07:57
generational wealth scan the Q code on
00:07:59
the screen to join my school Community
00:08:01
win likee Wall Street also you can check
00:08:04
out the step-by-step video I did on
00:08:05
building a DCF model which includes an
00:08:07
Excel file the link to that video
00:08:09
appears above and is in the description
00:08:11
as you can see on the left we take
00:08:13
specific line items we projected from
00:08:14
the three financial statements we use
00:08:16
these line items to calculate free cash
00:08:18
flow to the firm or fcff to this we add
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a terminal value which is the value from
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the end of the model out to Infinity
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because the company does not stop
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operating when our model ends in 5 years
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we discount these cash flows back to
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today to get theal Enterprise Value we
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strip out the debt we add the cash we
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strip out non-controlling interest we
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add associate Investments we get an
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intrinsic Equity value of $ 51.1 billion
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we divide by the current shares
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outstanding we get an implied share
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price of about $21 compared to the
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current close of $24 it is a 1.4%
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premium which is a sell rating on Wall
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Street if a stock is trading for more
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than its intrinsic value it's a sell
00:08:53
because we don't want to pay more than
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it's worth so what does Wall Street have
00:08:56
to say about coinbase stock and how can
00:08:59
that impact your portfolio let's cover
00:09:01
that next while some analysts Express
00:09:03
optimism about coinbase's growth
00:09:05
potential others highlight concerns
00:09:06
about valuation and competitive
00:09:08
pressures mizuo has a neutral rating on
00:09:11
the stock they reduce their target from
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280 to 2117 while acknowledging strong
00:09:16
trading volumes muho remains cautious
00:09:18
due to potential pricing pressures from
00:09:20
increased competition in the crypto
00:09:21
trading space Rosen BL Securities has a
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buy rating on the stock with a target of
00:09:26
305 they maintained a buy rating
00:09:28
reflecting a positive outlook on
00:09:29
coinbase's performance Bernstein has a
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buy rating on the stock with a target of
00:09:34
310 they initiated coverage with an
00:09:36
outperform rating indicating confidence
00:09:38
in coinbase's growth prospects this is a
00:09:41
screenshot of cap IQ I use it all the
00:09:43
time for my analyses 25 analyst cover
00:09:45
coinbase on Wall Street the Target price
00:09:48
range is from a low of 170 which is a
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177% decrease to a high of 475 which is
00:09:54
133% increase upside outweighs downside
00:09:57
by almost 7.8x 13 3 to 17 hedge funds
00:10:01
typically look for two times or greater
00:10:03
the median is 328 which is a 61%
00:10:06
increase the overall rating on a scale
00:10:08
of 1 to five is 2.22 which is an
00:10:10
outperform rating you should seek the
00:10:12
advice of investment professional always
00:10:13
I do not know your individual financial
00:10:14
situation this content is meant to
00:10:15
educate and is not investment advice
00:10:16
that being said I do not own a position
00:10:19
in coinbase though I do believe it could
00:10:21
have a place in my portfolio at the
00:10:23
right price if you decide to buy a
00:10:24
coinbase you need the right entry point
00:10:27
which I'll reveal shortly Warren Buffett
00:10:29
often talks about a moat when referring
00:10:31
to a competitive advantage that a
00:10:32
company has it refers to Medieval Times
00:10:35
when a wider moat around a castle meant
00:10:37
greater protection in the case of
00:10:39
coinbase there is little to no
00:10:40
competitive advantage to give you some
00:10:42
perspective right now there are around
00:10:44
20 or so online stock brokerages
00:10:46
available crypto exchanges like coinbase
00:10:49
there are over 500 to choose from that's
00:10:52
25 x more beta is a measure of
00:10:55
volatility by comparing how much a stock
00:10:57
moves relative to the market if a stock
00:10:59
moves in lock step with the market it
00:11:00
has a beta of one Higher beta means more
00:11:03
volatility and for this greater
00:11:05
volatility we should be compensated with
00:11:06
higher returns remember when the market
00:11:09
goes down higher beta means the stock
00:11:11
goes down more coinbase has the highest
00:11:14
beta of any stock that we've ever
00:11:16
analyzed on this channel but we have not
00:11:18
been compensated for the higher risk if
00:11:21
we look at a few examples Nvidia has a
00:11:23
beta of 1.8 and a one-year return of
00:11:26
30.4% Tesla has a beta of 2.5 and
00:11:29
one-year return of
00:11:30
62.2% paler has a beta of 2.8 and a
00:11:33
one-year return of
00:11:35
287.4 and coinbase has a beta of 3.5 and
00:11:39
a one-year loss of
00:11:42
23.5% many people buy coinbase thinking
00:11:45
it's a safer way to gain exposure to
00:11:47
bitcoin but the data does not reflect
00:11:49
that at all in fact Bitcoin has a higher
00:11:52
correlation with the S&P 500 than with
00:11:54
coinbase 0.92 versus 0.81 if you want
00:11:58
exposure to crypto and you think
00:12:00
coinbase is the answer it is not that's
00:12:02
not good since the IPO Bitcoin is up 38%
00:12:06
and coinbase is down 38% and coinbase
00:12:10
has a higher standard deviation than
00:12:12
Bitcoin so you are not getting
00:12:14
compensated for the higher risk with a
00:12:16
higher return but instead with a big
00:12:18
loss that's no way coinbase had a 52e
00:12:21
high of 3497 in early December 2024
00:12:24
after the postelection Surge and it's
00:12:26
down almost 42% since then in the next
00:12:29
year coinbase is down over 23% my model
00:12:32
shows a value of 2011 which is a 1.4%
00:12:35
premium at current levels on Wall Street
00:12:37
we buy with a margin of safety of at
00:12:39
least 20% so coinbase is a sell at
00:12:41
current levels but if you're interested
00:12:43
in buying coinbase I'd be looking to buy
00:12:45
below 170 in the 165 to 170 range
00:12:49
coinbase should be a satellite or
00:12:50
tactical position in a portfolio and due
00:12:53
to the volatility it's extremely
00:12:55
important to buy at a discount to
00:12:56
provide protection and a margin of
00:12:58
safety frankly if coinbase interests you
00:13:00
for the crypto exposure you're better
00:13:02
off buying Bitcoin directly or get your
00:13:05
exposure to bitcoin via the grayscale
00:13:07
Bitcoin mini trust ETF under the ticker
00:13:10
BTC BTC gives you the return and
00:13:13
exposure of Bitcoin without needing a
00:13:15
crypto wallet or crypto exchange and it
00:13:18
is accessible via any Standard Online
00:13:20
stock brokerage account if you like this
00:13:22
and want to see another in-depth stock
00:13:24
valuation check out my rivan video here
00:13:26
or my Celsius video here and if you
00:13:29
found this valuable please share this
00:13:30
with someone who you think would enjoy
00:13:32
this as always be relentless
