Looking ahead to next week’s Coinbase direct listing, analysts conclude that by no means it is a “done deal” game and predict the company could be valued anywhere between $20 billion and $230 billion.
With the direct listing, Coinbase shares will start trading on Nasdaq on April 14 under the ticker COIN. The listing is highly anticipated and seen as a defining and possibly pivotal moment for the industry.
Two financial investment and research firms have recently reported on the upcoming direct listing and Coinbase’s valuation.
Investment research firm, New Constructs, estimates the cryptocurrency exchange’s valuation could be closer to $18.9 billion while digital asset research firm, Delphi Digital, estimates a Coinbase valuation between $160 billion and $230 billion if the stock can command above-average price multiples.
According to Delphi Digital, the price of Coinbase shares will fluctuate greatly depending on forward guidance and growth expectations as well as the valuation multiple it winds up commanding.
The firm believes that a high valuation is depending on Coinbase’s ability to attract millions of new users, who would directly be responsible for revenues generated by its transactions. In their recent Q1 expected earnings, Coinbase announced a jump in verified users to 56 million at the end of March 2021 of which there were 6.1 monthly transacting users (MTU’s) generating approximately $1.8 billion in revenue.
While Delphi Digital stated that “it’s not implausible that the stock could trade closer to 15-20 times forward sales, which would imply a roughly $172 billion-$230 billion total market value,” it did issue some caution.
The firm believes that there is some market risk involved with COIN, especially if growth stocks continue to struggle relative to value peers. “Valuations for growth stocks are trading at significant premiums relative to historical averages,” Delphi reports.
The firm is not alone its warning and New Constructs believes that competitor exchanges have some simple tools available in this young market that can seriously impact COIN ‘s trading on Nasdaq.
“Competitors such as Gemini, Bitstamp, Kraken, Binance and others will likely offer lower or zero trading fees as a strategy to take market share, which would start the same ‘race to the bottom’ that we saw with stock-trading fees in late 2019. Similarly, if traditional brokerages begin offering the ability to trade cryptocurrencies, they will most certainly cut down on the unnaturally wide spreads in the immature cryptocurrency market,” New Constructs reports.
The firm is sceptical and according to their report, Coinbase “has little-to-no-chance of meeting the future profit expectations that are baked into its ridiculously high expected valuation of $100 billion.”
The firm’s report further concludes that “as the cryptocurrency market matures, we expect Coinbase’s transaction margins to drop precipitously.”
New Constructs calculates that in order to live up to the high expectations on Coinbase’s valuation of $100 billion, the company would need to see year on year growth of 50% in the next seven years. However, when taking Nasdaq’s greatest 10-year revenue growth rate of 21% into consideration, the outstanding COIN shares would be valued at roughly $20 billion.
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Source: Igaming
