Coinbase diversifies, but on the stock exchange is affected by the mood of bitcoin

So far, plenty of numbers and predictions. But what are the experts' assessments of Coinbase's business model? Generally speaking, one of the ffocuses is on business diversification. That is: the experts' demand is that, on the one hand, the company reduces its dependence on market dynamics, increasing the weight of revenues unrelated to trading; and that, on the other hand, it succeeds - within the same 'transaction revenues' - in improving their quality.

On the first front, the crypto company has made several steps forward. Admittedly, this is always influenced by the trend in prices. And, nevertheless, in the previous four-year period, the split between "Transaction revenues" and "Subscription & service" revenues has been balancing out. The former were worth about 96% of the revenues in 2020. The incidence remained effectively unchanged in 2021 (93%). Subsequently, however, the tune changed: in 2022, the weight of 'transaction revenue' dropped to around 75% and, last year, the breakdown was as follows: the incidence for 'transaction revenue' was around 52%, while the world 'unrelated' to trading was worth 48% of revenue. Finally, the first quarter of 2024. Here the weight of transaction revenue, in the wake of the rise in crypto asset prices, rose to 66%. A leap that worries? In principle, the answer is no. The important thing - is the experts' indication - is that the path marked out in previous years - net of the inevitable impact of the crypto trend - continues to be pursued.

Yes, pursued. What, on the other hand, is the situation on the second front of 'transaction revenue' quality? Here, some experts give a negative assessment. First of all, it is pointed out, the share of turnover related to 'alternative coins' where Coinbase achieves a higher spread is very high. True! Bitcoin and ether were worth 44% of transactional revenues in the last quarter. And, however, the 'alt coins' took home the rest (55%). A percentage which, considering how, in terms of volume, 'other crypto assets' are worth 43% of the trades, shows just how important - in the Coinbase ecosystem - these securities are. Cryptocurrencies which, in the face of the probable consolidation on a few major currencies, will be less and less - according to the experts - a source of trade and, therefore, of wealth for companies like Coinbase. Not only that. Another point noted by analysts - regarding the quality of transactional revenues - is the excessive imbalance in favour of the retail investor. It could also happen that, thanks to the Etf deals, institutional investors increase their presence. More. It is also possible that the company's improved offering (e.g. in Coinbase Prime) will attract more professional traders. Beyond that, however, there remains the hitherto excessive incidence of retail.

But it is not just a question of profit and loss figures or the quality of revenue. Another aspect is, of course, the stock market performance of the stock. Coinbase has gained over 130% in the past year. Since the beginning of the year, the shares of the centralised exchange have risen 48%. The scenario, on closer inspection, changes, widening the time frame considered. The company, in November 2021 - coinciding with one of the crypto world's peaks - had reached around $354. Now it is hovering around $250, which is the reference price of its IPO. In other words: the stock, after a remarkable jump, had collapsed in the wake of the 'crypto winter' due, among other things, to the many scandals that hit the sector in 2022. Not only that. Coinbase's shares have suffered from uncertainty due to investigations launched by the Sec into alleged violations - by the company - of the rules on financial instruments. In the last period, finally, there has been a recovery. A comeback that has pushed up the price-earnings ratio. According to Seeking Alpha, the prospective non-GAAP P/e as of 16/7/2024 is 34.5 times. Enterprise Value on revenues and Ebitda, for their part, are 9.98 and 19.6 times, respectively. All multiples which, various experts point out, signal that the stock is trading at a premium. As a result, the do-it-yourselfer is bound to be very careful with regard to the company in question. Also because 'the correlation with bitcoin,' explains Silvio Bona, an independent technical analyst, 'remains high. Coinbase's stock, similarly to the crypto queen, 'has entered a sideways phase. A trend with respect to which, with regard to static support, one must focus on the $200 area. While, with reference to resistance, again static, the level to monitor remains at $280-285'.

Further reading

The stock trend