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

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 with an EBITDA Margin of 61%. For context, 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. 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.