Bitcoin Adoption And Stablecoin Payments Will Drive Long Term Upside Potential

Catalysts

About Bakkt Holdings

Bakkt Holdings operates a regulated digital asset infrastructure platform that powers trading, custody and programmable payments for institutions and partners worldwide.

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

• Acceleration of Bitcoin adoption as an institutional treasury and savings asset positions Bakkt Markets and Bakkt Global to benefit from higher trading, custody and management fees, supporting revenue growth and operating leverage.
• The rapid shift of global payments and remittances onto stablecoin rails, combined with Bakkt Agent's AI driven cross border platform and distribution led model, can drive significant transaction volume growth, lifting fee revenue and affecting net margins as scale increases.
• Regulatory clarity around digital assets and tokenized real world assets, including anticipated U.S. policy frameworks, may favor regulated picks and shovels providers such as Bakkt, enabling faster institutional onboarding and potentially higher quality recurring earnings.
• Capital light international expansion through minority investments in markets such as Japan, Korea and India allows Bakkt to monetize its technology and custody capabilities via licensing and fee streams, influencing earnings growth without materially increasing balance sheet risk.
• Completion of the restructuring, elimination of debt and ongoing cost discipline create a lean operating base so that incremental revenue from Markets, Agent and Global may translate more directly into changes in EBITDA margins and net income.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Bakkt Holdings's revenue will decrease by 62.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from -1.1% today to 23.6% in 3 years time.
• Analysts expect earnings to reach $49.0 million (and earnings per share of $0.78) by about December 2028, up from $-41.5 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 30.4x on those 2028 earnings, up from -8.0x today. This future PE is greater than the current PE for the US Capital Markets industry at 23.8x.
• 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 8.14%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The long-term success of Bakkt's Markets and Global segments depends heavily on sustained growth in Bitcoin adoption and tokenization. If the digital asset cycle weakens or adoption slows materially, trading volumes and custody activity could fall, pressuring revenue growth and limiting operating leverage in the core infrastructure business.
• Bakkt Agent is positioned to ride the secular shift toward stablecoin based payments and cross border remittances. However, if large incumbents like Visa, Mastercard and major banks successfully build their own compliant rails or acquire competitors with greater distribution, Bakkt's share of transaction flows could be structurally constrained, reducing fee revenue and dampening earnings growth.
• The strategy relies on favorable and timely regulatory clarity such as the CLARITY Act and other tokenization frameworks. Any delay, reversal or more restrictive rules in key jurisdictions could slow institutional onboarding, raise compliance costs and compress net margins across the Markets and Agent platforms.
• International expansion through minority stakes in markets like Japan, Korea and India assumes strong local execution and partner traction. If these ventures underperform or Bitcoin treasury strategies in those entities do not materialize, Bakkt Global may deliver lower licensing fees and investment gains than expected, weakening long term earnings and return on invested capital.
• Although restructuring has improved efficiency, the company is still early in proving durable profitability once Loyalty revenues roll off. If distribution partnerships for Bakkt Agent or customer growth in Markets ramp more slowly than planned while fixed costs remain high, adjusted EBITDA margins and net income could deteriorate from current levels.

Valuation

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

• The analysts have a consensus price target of $40.0 for Bakkt Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $207.9 million, earnings will come to $49.0 million, and it would be trading on a PE ratio of 30.4x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of $13.88, the analyst price target of $40.0 is 65.3% 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.