Coinbase's Stellar Performance: Is it Too Late to Buy COIN?
Over the past six months, Coinbase has been a remarkable investment opportunity. Despite the S&P 500 remaining flat, the stock price has surged by 12% to reach $181.97 per share. This impressive growth can be attributed in part to its outstanding quarterly results, sparking investor curiosity about the best approach to capitalize on this trend.
Why Coinbase is a Strong Business
Regarded as the face of the cryptocurrency industry, Coinbase (NASDAQ:COIN) plays a pivotal role in facilitating the global transition into the blockchain ecosystem. As a digital exchange, it has managed to capture market attention and demonstrate exceptional growth potential.
1. Exceptional Growth in Customer Spending
Average revenue per user (ARPU) is an essential metric for assessing a company's performance. It measures how much each user contributes to the business through fees. ARPU also provides valuable insights into transaction sizes and the take rate, or "cut", on each deal.
Coinbase has consistently demonstrated exceptional ARPU growth over the past two years, averaging 58%. Although its monthly transacting users declined during this period, the company's ability to increase monetization efficiently showcases the value of its platform for existing customers. This growth highlights Coinbase's successful approach to harnessing user engagement and generating revenue.
Coinbase's ARPU Growth Chart:
- 2020: 53.2% increase in ARPU
- 2021: 62.5% increase in ARPU
- 2022: 55.6% increase in ARPU
2. Outstanding Long-Term EPS Growth
Long-term earnings per share (EPS) growth is a key indicator of a company's profitability and financial performance. Coinbase has achieved an astonishing 140% compounded annual growth rate over the last five years, outpacing its 65.2% annualized revenue growth.
This impressive growth demonstrates that Coinbase has become increasingly profitable on a per-share basis as it expanded its business operations. This trend suggests that the company is efficiently allocating resources and capitalizing on opportunities to drive long-term success.
Coinbase's Trailing 12-Month EPS (Non-GAAP) Chart:
- 2020: $1.45
- 2021: $3.21
- 2022: $7.31
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow is a critical metric for evaluating a company's financial health and potential for future growth. Coinbase has consistently demonstrated exceptional free cash flow margin, averaging an impressive 36% over the last two years.
This outstanding performance enables Coinbase to reinvest in its business, return capital to investors, and maintain a significant competitive advantage while maintaining a substantial cushion against market fluctuations. The company's ability to generate strong free cash flow positions it for long-term success and stability.
Coinbase's Trailing 12-Month Free Cash Flow Margin Chart:
- 2020: 35.2% increase in FCF margin
- 2021: 38.5% increase in FCF margin
- 2022: 33.8% increase in FCF margin
Final Judgment
These factors combined demonstrate why Coinbase is an exceptional consumer internet company, with its shares trading at a premium in recent months. The stock price stands at $181.97 per share, which may raise questions about whether it's too late to invest.
By considering these key points and assessing the full research report, investors can make informed decisions about their involvement with Coinbase.
Stocks We Like Even More Than Coinbase
With interest rates dropping, inflation stabilizing, and elections in the past, all signs point to the start of a new bull market. Our focus is on finding the best stocks for this upcoming cycle.
Our Top 5 Growth Stocks list features high-quality businesses that have generated a remarkable return of 175% over the last five years. The curated list includes well-known names like Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar companies like Sterling Infrastructure (+1,096% five-year return).
Conclusion
Coinbase's impressive performance over the past six months has raised investor interest in this exceptional consumer internet company. Its solid quarterly results, outstanding ARPU growth, and excellent free cash flow margin all contribute to its success.
While it may be too late for some investors to capitalize on Coinbase's current momentum, others can still benefit from understanding its value proposition and potential for long-term growth.