COIN: Synergistic Blockchain Expansion Will Drive Equity Value And Sector Leadership

Key Takeaways

• Growing institutional partnerships and expanded blockchain product offerings position Coinbase as the leading access point for digital asset adoption and advanced trading activity.
  
• Proprietary blockchain platforms and integrated payment solutions enable ecosystem lock-in and drive a shift toward higher-margin services and recurring revenue streams.
  
• Heavy dependence on trading amid falling volumes, rising cybersecurity and compliance costs, competitive fee pressures, and uncertain diversification threaten revenue stability and earnings predictability.

Catalysts

Operates platform for crypto assets in the United States and internationally.

• Coinbase is positioned to benefit as more financial assets-including equities, real-world assets, and alternative investments-transition onto blockchain-based rails through tokenization, vastly expanding its addressable market and enabling a major increase in potential trading/revenue streams.
  
• Increasing global adoption of stablecoins and blockchain-based payment rails (including through new regulations like the GENIUS Act) creates a powerful network effect for Coinbase's vertically integrated payment stack (USDC, Base, APIs), with significant upside for both transaction-based revenue and recurring subscription/service revenue.
  
• The company's leadership in building trusted, compliant infrastructure has resulted in partnerships with major financial institutions (e.g., BlackRock, PNC, JPMorgan, Stripe, Shopify), positioning Coinbase as the preferred onramp for institutions entering the digital asset space-likely driving institutional trading volumes and custody revenues higher over time.
  
• Direct integration of decentralized exchanges and perpetual derivatives products-now permitted under a more favorable regulatory regime-broadens Coinbase's product offering to capture more high-frequency and advanced trading activity, with an expected positive impact on transaction revenue and long-term market share.
  
• Launch and adoption of proprietary blockchain platforms such as Base and the Base super app could drive user growth via novel on-chain utilities (e.g., blockchain-based identity, creator monetization, DeFi services), fostering ecosystem lock-in and potentially improving net margins as higher-margin, service-based revenues increase in the overall mix.

Coinbase Global Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Coinbase Global's revenue will grow by 8.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 42.7% today to 24.3% in 3 years time.
• Analysts expect earnings to reach $2.1 billion (and earnings per share of $7.3) by about September 2028, down from $2.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.8 billion in earnings, and the most bearish expecting $1.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 62.1x on those 2028 earnings, up from 28.6x today. This future PE is greater than the current PE for the US Capital Markets industry at 26.7x.
• Analysts expect the number of shares outstanding to grow by 2.63% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.18%, as per the Simply Wall St company report.

Coinbase Global Future Earnings Per Share Growth

Risks

• Declining spot trading volumes and reduced retail/institutional participation: The company reported a 40% decline in total trading volume, with consumer spot trading revenue down 41% and institutional transaction revenue down 38%-indicating that prolonged periods of lower volatility and diminished risk appetite could significantly depress transaction-based revenues and future earnings.
  
• Ongoing cybersecurity and data breach risks: The May data theft incident resulted in a $307 million expense in a single quarter, underscoring persistent cybersecurity challenges that can directly negatively impact operating expenses, net margins, and user trust.
  
• Uncertainty in sustainable revenue diversification: While management emphasizes growth in subscription/services and new product lines like derivatives or payments, much of the current profitability remains tied to trading activity, exposing Coinbase to cyclical market swings and putting future revenue and margin predictability at risk if diversification efforts underperform.
  
• Heightened competition from decentralized exchanges and industry fee compression: Coinbase's planned integration of decentralized exchanges (DEXs) within its app may cannibalize its own retail volumes, and as more platforms-including DEXs and incumbents-compete on fees, gross margins and earnings may face long-term compression.
  
• Increased regulatory and compliance costs despite emerging clarity: Even with recent positive regulatory developments, ongoing legal, compliance, and operational requirements (e.g., system hardening after breaches, adapting to evolving global frameworks) could consistently elevate operating expenses and limit net income growth.

Valuation

• The analysts have a consensus price target of $366.536 for Coinbase Global 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 $510.0, and the most bearish reporting a price target of just $185.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $8.5 billion, earnings will come to $2.1 billion, and it would be trading on a PE ratio of 62.1x, assuming you use a discount rate of 8.2%.
• Given the current share price of $318.78, the analyst price target of $366.54 is 13.0% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• 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.