Long-Term Onchain And Staking Adoption Will Support This Bullish Crypto Platform Thesis

Catalysts

About Gemini Space Station

Gemini operates a regulated crypto platform that connects retail and institutional users to trading, credit card, custody, staking and onchain products.

What are the underlying business or industry changes driving this perspective?

• Expansion into Europe under MiCA, Australia under AUSTRAC registration and progress toward a full license in Singapore increases the number of markets where Gemini can legally offer services, which can support broader customer acquisition and transaction revenue growth.
• Growing use of crypto in everyday spending, reflected in Gemini Credit Card volumes of more than US$350 million and over 100,000 open accounts, supports higher services revenue and provides a recurring fee and interest income stream tied to card receivables of US$150.6 million.
• Institutional adoption of onchain finance, seen in Q3 spot volumes of US$14.6 billion from institutions, can support deeper liquidity on the exchange and help improve fee based transaction revenue and overall earnings quality.
• Rising engagement with staking, supported by Gemini Wallet, native staking infrastructure and Solana validator capabilities alongside staking balances of US$741 million, can increase higher margin services revenue and diversify earnings away from pure trading.
• Tokenization of traditional assets and the move of markets onchain, including tokenized stocks under the EU license and support for multiple networks and stablecoins, can expand addressable use cases on the platform and support longer term growth in both transaction revenue and services revenue.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Gemini Space Station's revenue will grow by 57.6% annually over the next 3 years.
• Analysts are not forecasting that Gemini Space Station will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Gemini Space Station's profit margin will increase from -288.6% to the average US Capital Markets industry of 25.6% in 3 years.
• If Gemini Space Station's profit margin were to converge on the industry average, you could expect earnings to reach $162.8 million (and earnings per share of $1.13) by about January 2029, up from $-469.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 22.8x on those 2029 earnings, up from -2.6x today. This future PE is lower than the current PE for the US Capital Markets industry at 25.8x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.21%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Crypto markets remain volatile and cyclical, so if trading activity or asset prices weaken for a prolonged period, the US$16.4 billion of Q3 spot volume and the US$26.3 million of transaction revenue could be hard to sustain. This would pressure revenue and earnings.
• Gemini is still investing heavily in growth, with Q3 operating expenses of US$171.4 million against net revenue of US$49.8 million. If revenue growth slows while compensation, technology and marketing costs stay elevated, net margins and the path to profitability could remain under pressure.
• The model leans on services like the Gemini Credit Card and staking, with Q3 services revenue of US$19.9 million and card receivables of US$150.6 million. A turn in consumer credit quality, higher fraud losses or tighter regulation on staking or tokenized products could weigh on services revenue and earnings quality.
• Expansion into Europe under MiCA, into Australia under AUSTRAC registration and the pursuit of a full license in Singapore all depend on regulators and partners. Any shift in policy toward crypto, or delays in approvals such as the CFTC application for prediction markets, could limit long term growth in revenue and earnings.
• The business relies on third party financing and crypto linked balance sheet items, including a US$150 million credit facility for card receivables and several Bitcoin and Ether related loans. Tighter funding markets or weaker crypto collateral values could strain liquidity, increase funding costs and affect earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $19.25 for Gemini Space Station based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $27.0, and the most bearish reporting a price target of just $11.5.
  
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $636.1 million, earnings will come to $162.8 million, and it would be trading on a PE ratio of 22.8x, assuming you use a discount rate of 10.2%.
  
• Given the current share price of $10.25, the analyst price target of $19.25 is 46.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.