The Coinbase application on a smartphone.
Tiffany Hagler-Geard/Bloomberg
Coinbase, which just reported a near-850% surge in first-quarter revenue, is benefiting from its early entrance in the crypto market, said Devin Ryan, a director of financial technology research at JMP Securities.
Coinbase, the largest U.S. cryptocurrency exchange, turned in a huge first quarter earlier this week. The San Francisco-based company said first-quarter net income jumped to between $730 million to $800 million, and it expects first-quarter total revenue of about $1.8 billion—up 847% from the same period in 2020.
Coinbase reported annualized revenue in the first quarter of $7.2 billion, compared with just $1.3 billion in all of 2020, Ryan said in an April 7 analyst note. At $7.2 billion, Coinbase’s revenue is on par with much bigger exchanges like the Intercontinental Exchange (ticker: ICE), owner of the New York Stock Exchange. ICE in 2020 reported $8.2 billion in total revenue, which is the sum of all money generated by a business without any deductions. Nasdaq (NDAQ) posted total revenue of $5.6 billion in 2020, according to its annual report.
“Coinbase has been one of the fastest growing platforms at scale across the financial technology landscape, and is now one of the largest by revenue, users, and value—and less than 10 years into its journey, we expect to see substantial innovation and evolution from here,” said Ryan, in an emailed response to questions. He declined to comment directly on any comparison.
Coinbase is one of the first crypto exchanges to go public. The company is listing its shares on April 14. If the Coinbase offering does well, it is expected to set off a wave of other crypto companies seeking to tap the public equities markets. Kraken, a cryptocurrency exchange and one of the oldest Bitcoin exchanges in the world, is also weighing a public listing, while Gemini, the cryptocurrency exchange from Cameron and Tyler Winklevoss, is said to be considering an IPO.
Coinbase may be benefiting from its first-mover advantage, but it isn’t complacent, Ryan said. The company is “evolving toward a more holistic platform to serve users across broader crypto needs well beyond just trading,” he said.
Coinbase is targeting a much broader addressable market, Ryan said. Brian Armstrong, Coinbase’s CEO, said during an investor call Tuesday that the company’s addressable market is “anyone with a smartphone.” This includes 3.5 billion individuals with a cellphone, as well as institutions that oversee many tens of trillions of dollars in capital, and millions of potential ecosystem partners that can build or use crypto applications or participate in crypto networks, Ryan said in the note.
“Accordingly, we expect to see substantial innovation in the years to come as the crypto economy matures and Coinbase develops increased connectivity for existing customers and potentially adds new customer channels over the long term,” Ryan said.
Jamie Friedman, senior fintech research analyst at Susquehanna Financial Group, said in a different note that Coinbase has emerged as a crypto leader, with a large user base as well high retail and institutional volume. Friedman warned that Coinbase’s stock may be correlated to the value of crypto itself. Bitcoin in March hit an all-time high of more than $60,000, outperforming other asset classes. “COIN sees more volume—and more monthly active user engagement—when the price of Bitcoin rises. And conversely, COIN sees less volume—and less monthly active user engagement—when the price of Bitcoin falls,” Friedman said in the note.
Coinbase’s revenue in the first quarter was higher than all the revenue it generated in 2020, Friedman said. Roughly 86% of Coinbase revenue comes from trading while 4% comes from subscription, he said.
Peers for Coinbase include PayPal Holdings (PYPL), Square (SQ), Charles Schwab (SCHW), and Nasdaq, Friedman said.
Coinbase will have a market capitalization of $96 to $108 billion, according to Friedman. At $96 billion, Coinbase will trade at 11 to 12 times 2023 estimated sales, he said.
Write to Luisa Beltran at [email protected]
