Where’s the Profits? Coinbase (COIN) Might Loose Money in 2022

Stock (Symbol)

Coinbase (COIN)

Stock Price


Data is as of
April 1, 2022
Expected to Report
May 12
Company Description
Coinbase Global, Inc. is a financial technology company that provides end-to-end financial infrastructure and technology. It is primarily focused in building cryptoeconomy, a transparent financial system enabled by crypto that leverages crypto assets, a digital asset that is built using blockchain technology. Its platform enables approximately 43 million retail users, 7,000 institutions, and 115,000 ecosystem partners in over 100 countries to participate in the cryptoeconomy. For retail users it offers primary financial account to invest, store, spend, earn and use crypto assets. It provides one-stop shop for hedge funds, money managers and corporations for accessing crypto markets through advanced trading and custody technology. The Company provides developers, merchants and asset issuers a platform with technology and services that enables them to build applications that leverage crypto protocols, participate in crypto networks and securely accept cryptocurrencies as a payment. Source: Thomson Financial
Sharek’s Take
David SharekWait, what? Last qtr, Coinbase (COIN) was expected to make $6.93 a share in 2022. Now that figure is $0.74. Where’s the profits? Well, they’re going to invest in upcoming business opportunities like derivatives (calls and puts) as well as NFTs (which are basically computer generated gif images). For 2022, if COIN performs at the middle or high range of managements projections, the company expects to be profitable. Wow, that’s not a vote of confidence in the stock as the company made $14.50 in EPS in 2021. If COIN performs at the low end of its range, management expects a loss of less than $500 million.

Coinbase is a platform to invest in, store, and trade cryptocurrency (and other related products). The company boasts more than 89 million users in more than 100 countries (as of Fiscal Year 2021). Coinbase also offers infrastructure tools and technology to other cryptocurrency service providers, including trading APIs and data access. A majority of revenue is from transactions in Bitcoin and Ethereum. The company invests heavily in regulatory compliance by working with regulators around the world to shape policy, and has pioneered industry-leading security practices for safeguarding crypto assets. The company has risk of cryptocurrencies declining in value, and cyberattackes that could cause hackers to steal its customer’s cryptocurrencies. The company counts both retail investors and institutions as customers to transact in crypto (source: COIN prospectus):

  • Retail Users: Coinbase offers financial account for crypto economy.
  • Institutions: what’s unique about Coinbase is provides secure infrastructure to hedge funds, money managers and corporations a one-stop for accessing crypto markets through advanced trading and custody technology.
  • Ecosystem Partners: The company provides developers, merchants, and asset issuers a platform with technology and services that enables them to build applications that leverage crypto protocols.

Here’s some recent moves COIN has made:

  • October 12, 2021 Coinbase announced it would be launching Coinbase NFT, a marketplace to search for, buy, sell, and store non-fungible tokens, or NFTs. For those not familiar with NFTs, they are basically cartoon type images which resemble a jpeg, but with ownership. NFTs can be bought and sold as collectables, with many costing thousands of dollars. This move is a natural extension for Coinbase, as all NFT’s are on the blockchain, which is used for cryptocurrency.
  • October 19, 2021 Facebook choose Coinbase as its custody partner for its pilot of is digital wallet, Novi. Novi will enable people to send and receive money abroad instantly, securely, with no fees.
  • January 12, 2021 Coinbase announces its set to acquire FairX, a U.S. based crypto derivatives platform, and expands into crypto futures, such as calls and puts. This will allow investors to, say, speculate on Bitcoin options by purchasing call options, or perhaps give institutions or investors protection on the coins they already own by purchasing put options to lower overall risk.
  • Last qtr, the company introduced Coinbase Payroll, which allows workers to receive compensation in cryptocurrency. During the same period, they also launched Coinbase Tax Center, which simplifies the tax filing process for U.S. retail customers. Based on studies, 1 in every 4 U.S. households now owns crypto assets.

Coinbase has a reputation of having a the safest crypto-security platform, and for charging higher fees. The “take rate” if 3% to 4% of customer assets is high, and is likely to decline over time as competing asset managers enter the crypto market. COUN was added to the Aggressive Growth Portfolio last qtr. I will sell COIN from the Aggressive Growth Portfolio, this is a risky asset at a time when higher interest rates are taking a bite out of speculative stocks.

One Year Chart
This stock had a PE of 33 last qtr, as we thought the company would earn $6.93 a share. Now, with that estimate at $0.74, the P/E is is a lofty 253.

The Est. LTG of 67% is outstanding. This figure was unchanged since last qtr. 

Notice the company was making profits, and next qtr’s N/A signifies a loss is expected.

Earnings Table
Last qtr, Coinbase recorded 269% profit growth and surpassed expectations of 90% growth. Revenue increased 401%, from last year. Transaction revenue jumped 378% and accounted for 91% of company sales. Subscription and services revenue accelerated 931% and accounted for 9% of total sales. Trading volume in the platform increased 515%. Monthly transacting users (MTU) grew 307% to over 11 million. 

Sales growth, during the qtr, was driven by crypto use cases like non-fungible tokens (NFTs), adoption of decentralized finance, play-to-earn games, and metaverse transactions.

Qtrly Profit Estimates for 2022 just went from $6.93 to $0.74 a share. Whew!

Qtrly Profit Estimates are poor. Analysts expect just one qtr of profitability this year.

Fair Value
My Fair Value P/E remains at 35x profits, which works out to $26 for 2022 and $109 for 2023. lolol. That Fair Value P/E was from last qtr, and I’m not changing it — I’m selling the stock instead.
Bottom Line
Coinbase (COIN) has been a wild stock since it went public in April 2021. Now the shares are in a downtrend.

Coinbase has perhaps the safest wallets for cybercurrency, and the company charges a premium price on transactions for this perk. This is good for profits, but competitors with lower prices will likely force this company to reduce its profit margins. Lower margins is the big picture, not excessive spending.

Coinbase will be removed from the Aggressive Growth Portfolio today.

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