I bought a *very small* starter position in Coinbase $COIN this morning at ~$240, and am willing to buy more if it continues dropping from here.
Here's my rationale:
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First, the short term.
$COIN trades at ~$63 billion market cap @ current prices. I conservatively think they'll earn ~$4.7 billion in revenue & ~$2 billion in net income this year (model snippet below):pic.twitter.com/tjycpkOrlK
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My volume projections are still pretty conservative given YTD performance. Volumes would need to fall off a cliff for Coinbase to not hit $5 billion in revenue this year. Possible, but unlikely.pic.twitter.com/1asD7MzJ9b
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At $5 billion in revenue & conservative 45% net margins,
$COIN is currently trading for ~27x this year's earnings. Certainly not nosebleed valuations considering where it IPO'd.Show this thread -
This year may very well be an anomaly volume-wise, but NO ONE knows what steady state crypto volumes should be. In the absence of a good long-term forecast, I turn to the Virtu principle:
$COIN is now a "cheap" crypto vol call option.Show this thread -
Another benefit of owning
$COIN is I can be long crypto vol without betting on a particular coin. Bitcoin out of style? No problem, Ethereum made up a big % of Coinbase volumes last quarter. Etc etc with smaller coins in the future.Show this thread -
There's also the Coinbase user growth angle to consider, which has been strong as of late. Top position on the app store gives us clues:https://twitter.com/goodalexander/status/1392917656160833546?s=20 …
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Can it keep going down? Absolutely. Could volumes dry up? Absolutely. Is it cheap enough now to take the risk? I believe so. Questions/feedback welcome.
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End of conversation
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