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Coinbase Global Inc Ordinary Shares - Class A COIN

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Morningstar’s Analysis

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A Surge in Cryptocurrency Prices Drives a Strong Second Quarter for Coinbase

Michael Miller Equity Analyst

Analyst Note

| Michael Miller |

No-moat Coinbase reported strong second-quarter results with earnings of $6.42 per share and net revenue of $2.23 billion coming in above our expectations. Earnings benefited from a tax benefit of $737 million as a result of tax deductions associated with the company’s direct listing. Strong cryptocurrency prices during the quarter drove total trading volume to a new all-time high of $462 billion, 38% more than last quarter. However, Coinbase relies on retail traders for most of its revenue, a consequence of the higher fees they pay, and retail trading volume growth of 21% meant that transaction revenue grew only 25% from last quarter to $1.93 billion. While impressive, these results do not materially alter our long-term projections for Coinbase, as they depend more on the adoption of cryptocurrency as a new asset class than the amount of trading volume that occurs in any individual quarter. That said, the strength of Coinbase's performance during the quarter, as well as continued cryptocurrency volatility since the end of June, has led us to increase our short-term expectations and increase our fair value estimate to $201 per share from $194.

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Company Profile

Business Description

Founded in 2012, Coinbase is the leading cryptocurrency exchange platform in the United States. The company intends to be the safe and regulation-compliant point of entry for retail investors and institutions into the cryptocurrency economy. Users can establish an account directly with the firm, instead of using an intermediary, and many choose to allow Coinbase to act as a custodian for their cryptocurrency, giving the company breadth beyond that of a traditional financial exchange. While the company still generates the majority of its revenue from transaction fees charged to its retail customers, Coinbase uses internal investment and acquisitions to expand into adjacent businesses, such as prime brokerage, data analytics, and collateralized lending.

c/o The Corporation Trust Company, 1209 Orange Street
Wilmington, DE, 19801
T +1 302 777-0200
Sector Technology
Industry Software - Application
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 2,176