A Few Years From Now, You’ll Wish You’d Bought This Undervalued Stock
When you look back at the stock market, you can easily see the opportunities that slipped through your fingers — whether it was failing to invest in Amazon in the early 2000s or passing on Tesla before its meteoric rise.
While there’s no crystal ball that can reveal the future, you can make educated guesses based on current trends, market potential, and a company’s strategic positioning. One stock that investors might regret not picking up a few years from now is the crypto exchange Coinbase Global (NASDAQ: COIN).
Crypto is outdoing the internet’s growth
Coinbase is uniquely positioned within the burgeoning cryptocurrency market, which is projected to continue its rapid growth. According to a report by House of Chimera Research, the global cryptocurrency market is already larger than the internet was back in 2000. At its current pace, crypto adoption could reach 1 billion users by 2026, a mark the internet didn’t reach until 2005. By all signs, crypto is on track to grow faster and larger than the internet. And if I had to guess, it will be just as disruptive if not more.
Being in such a high-growth industry will undoubtedly benefit Coinbase. But to get an idea for how the company has fared so far in the up-and-coming market and where it might be headed, all you need to do is look back.
Virtually every meaningful statistic demonstrates exponential growth for Coinbase. The company has been around for more than a decade, but during the past five years the growth has been staggering. Since 2019, Coinbase’s revenue has skyrocketed by 550%. Its trading volume surged by 4,300%, and its monthly transacting users (MTUs) increased 10-fold.
Coinbase is evolving for the better
As favorable as Coinbase’s position is, it is only part of the reason Coinbase is one of those stocks that investors will regret not buying. Even though Coinbase operates in a high-potential market, basic business principles still apply. In other words, it still needs to run a profitable business. But with a quick exploration it is clear that Coinbase has just that.
Just a few years ago, it probably couldn’t be said that Coinbase was running a sound business. Relying heavily on transaction fees for revenue, this business model proved lucrative during bull markets but risky during downturns. The crypto winter of 2022 highlighted this vulnerability when trading volume plummeted, leading to a $1 billion net loss for in the second quarter of that year.
The company has since undergone a significant transformation by diversifying its revenue streams. Today, transaction fees account for just 60% of its revenue, with the remainder coming from a variety of sources including subscriptions, interest on stablecoins, custodial fees, and other products. This diversification not only stabilizes Coinbase’s financial performance, but also positions it for long-term success, regardless of market conditions.
Moreover, and arguably the most encouraging trend, is Coinbase establishing itself as the go-to platform for not just retail investors, but also deep-pocketed institutions. As crypto continues to prove that it isn’t going anywhere and as financial regulations become more clear and comprehensive, more traditional financial entities are exploring the power of crypto and Coinbase is becoming the favorite of institutions. This impactful role is captured best when considering that it is the custodian for the newly approved spot Bitcoin and Ethereum exchange-traded funds (ETFs), a testament to its reputation and reliability in the industry.
Beyond that, Coinbase’s commitment to innovation will ensure it keeps pushing crypto adoption forward for years to come. The best success story from this perspective has been in its launch of Base, a blockchain that has quickly gained popularity due to its speed and low transaction costs. In just about a year, Base has generated more than $50 million in revenue for Coinbase, most of which is profit due to the low maintenance costs of the blockchain.
The opportunity at hand
Discovering clear long-term opportunities in the market like Coinbase is rare, but several indicators suggest that Coinbase is a stock investors might regret not buying today. Positioned within the rapidly growing cryptocurrency industry, Coinbase has demonstrated remarkable adaptability, continually innovating and diversifying its revenue streams.
As crypto advances toward mainstream adoption, Coinbase mirrors the tech giants that ascended from the internet’s early days to prominence during the past decade. From this viewpoint, despite being significantly below its all-time high, Coinbase’s stock appears undervalued relative to its long-term potential.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. RJ Fulton has positions in Coinbase Global and Tesla. The Motley Fool has positions in and recommends Amazon, Coinbase Global, and Tesla. The Motley Fool has a disclosure policy.
A Few Years From Now, You’ll Wish You’d Bought This Undervalued Stock was originally published by The Motley Fool
