Should you buy Coinbase stock? March 2023
- 5 months ago
For the entire 2022, the company had an operating loss of over $2.7 billion. For comparison, in 2021, the company managed to bring in more than $3 billion in operating profit.
This means the entire future of the company is dependent on how the cryptocurrencies are priced. The company has cash of over $4.4 billion with almost $3.4 billion in long-term debt. With the current liquidity, it is very difficult for the company to survive. Not only that, but there’s not much the management can do as they cannot (legally) influence the prices of cryptocurrencies.
The recent scandals, especially FTX, do not help the company at all as the trust in the crypto exchanges has significantly decreased.
The only action that the management can take is to reduce the operating expenses. In order to break even, they need to be halved!
This begs the question, is Coinbase worth the $15 billion market cap? This answer is difficult to answer as Coinbase cannot be valued using any traditional valuation model. Its valuation is dependent on the prices of the cryptocurrencies. If the prices of cryptocurrencies remain at this level, Coinbase could be bankrupt in less than 2 years.
How is investing in Coinbase different than investing in Bitcoin? At this moment, it isn’t significantly different. Coinbase could be seen as a diversified bet on cryptocurrencies as its transaction fees come from all of the cryptocurrencies, not only Bitcoin.
This means the entire future of the company is dependent on how the cryptocurrencies are priced. The company has cash of over $4.4 billion with almost $3.4 billion in long-term debt. With the current liquidity, it is very difficult for the company to survive. Not only that, but there’s not much the management can do as they cannot (legally) influence the prices of cryptocurrencies.
The recent scandals, especially FTX, do not help the company at all as the trust in the crypto exchanges has significantly decreased.
The only action that the management can take is to reduce the operating expenses. In order to break even, they need to be halved!
This begs the question, is Coinbase worth the $15 billion market cap? This answer is difficult to answer as Coinbase cannot be valued using any traditional valuation model. Its valuation is dependent on the prices of the cryptocurrencies. If the prices of cryptocurrencies remain at this level, Coinbase could be bankrupt in less than 2 years.
How is investing in Coinbase different than investing in Bitcoin? At this moment, it isn’t significantly different. Coinbase could be seen as a diversified bet on cryptocurrencies as its transaction fees come from all of the cryptocurrencies, not only Bitcoin.