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Coinbase (NASDAQ: COIN), one of the world's largest cryptocurrency exchanges, went public via a direct listing in April 2021. Its stock opened at $381, jumped as high as $429.54 during intraday trading, and ended its first day at $328.28. It went through some wild swings and eventually rose to its all-time high of $357.39 seven months later.
At the time, the buying frenzy in cryptocurrencies -- which was driven by low interest rates, social media buzz, and stimulus checks -- boosted Coinbase's trading volumes. But over the following two years, rising interest rates and other macro headwinds chilled the crypto market and drove the company's stock to a record low of $32.53 on Dec. 28, 2022.
That 90% decline convinced many investors that Coinbase's high-growth days were over. But as of this writing, Coinbase trades at about $267 -- so a $10,000 investment at its record low would have grown to more than $82,000 in just over two years. Let's see why its stock warmed up again -- and where it might head over the next five years.
What happened over the past five years?
Coinbase generates most of its revenue from its trading fees. Its trading volume and total revenue skyrocketed in 2020 and 2021 as the crypto market heated up along with hypergrowth stocks, meme stocks, and more speculative investments. But in 2022 and 2023, both metrics plummeted as rising interest rates heralded the start of a new crypto winter.
| Metric | 2020 | 2021 | 2022 | 2023 | 9M 2024 |
|---|---|---|---|---|---|
| Trading Volume Growth (YOY) | 81% | 766% | (50%) | (44%) | 131% |
| Total Revenue Growth (YOY) | 144% | 545% | (57%) | (7%) | 99% |
Data source: Coinbase. YOY = Year-over-year.
Coinbase's trading volume and revenue soared again in the first nine months of 2024 as interest rates declined and crypto trading volumes returned. Some additional catalysts included Bitcoin's (CRYPTO: BTC) approvals of its first spot price ETFs last January, Bitcoin's latest halving in April (which reduces the rewards for mining the cryptocurrency by half every four years), and the ascension of President Trump's crypto-friendly U.S. administration.
In its latest quarter, Coinbase generated 35% of its transaction revenue from Bitcoin, 16% from Ethereum (CRYPTO: ETH), and 11% from Solana (CRYPTO: SOL). The remaining 38% came from other types of crypto assets. Simply put, if the world's top cryptocurrencies continue to rise, Coinbase's revenues will also soar higher.
Coinbase reined in its spending as the crypto market cooled off, so its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) stayed positive over the past seven consecutive quarters. For the full year, analysts expect its revenue to soar 94% to $6.04 billion as its adjusted EBITDA surges 205% to $2.94 billion. With an enterprise value of $62.6 billion, Coinbase still looks reasonably valued at 10 times this year's sales and 21 times its adjusted EBITDA.