It isn't often that a stock up more than 300% since 2023 can still be considered a "must-buy" for growth investors. But Coinbase Global(NASDAQ: COIN) is no ordinary stock.
As a leader in the cryptocurrency space, Coinbase stands at the forefront of a financial revolution, offering significant long-term potential. Here are three compelling reasons why every growth-oriented investor should consider adding Coinbase to their portfolio today.
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1. The simplest exposure to crypto's growth
The cryptocurrency market is both vast and complex. With thousands of cryptocurrencies trading globally, it's challenging for investors to identify which coins will stand the test of time.
The harsh truth is that most of today's cryptocurrencies, aside from a few established names like Bitcoin and Ethereum, may not survive over the long term or be worth much in the future. However, this doesn't mean the crypto asset class is without immense potential for growth.
There are numerous use cases for blockchain technology and digital assets in the future, from decentralized finance (DeFi) to decentralized physical infrastructure networks (DePIN) and tokenization of real-world assets. Instead of betting on individual winners, Coinbase provides a simpler, more diversified way to gain exposure to the entire crypto industry.
Coinbase's business model spans beyond just facilitating cryptocurrency transactions. It generates revenue from various crypto-based products and services, offering investors exposure to the entire ecosystem.
Coinbase benefits from trading volume on its exchange, but it's also involved in staking, stablecoin interest, custodial services, and its own blockchain -- Base. This diversification allows Coinbase to capture value from multiple aspects of the crypto market, making it a safer, more comprehensive way to invest in the sector's potential growth
2. A transformation story
Speaking of business models, Coinbase's business model has undergone a significant transformation in recent years. In 2022, the company posted over $2.6 billion in losses, largely due to its reliance on transaction fees. When prices tumbled during the crypto winter, trading volumes dried up, leading to substantial revenue declines. At one point, more than 90% of Coinbase's revenue came from transaction fees.
However, Coinbase took this downturn as an opportunity to evolve. Since then, the company has diversified its revenue streams, making it less dependent on the cyclical nature of crypto trading. Today, transaction fees account for about 65% of Coinbase's revenue. The company now generates additional revenue from staking services, stablecoin interest, custodial fees, and blockchain activities through Base.
This strategic pivot has stabilized Coinbase's revenue and weathered the volatility that naturally occurs in the cryptocurrency market. By reducing its reliance on a single revenue source while expanding others, Coinbase is a more resilient company and better positioned to capture future market opportunities.
Further exemplifying its transformation, Coinbase has streamlined its operations by cutting costs by approximately 40% while expanding these new revenue streams. The result is a leaner, more efficient business that should be able to thrive in both bull and bear markets.
3. A prime buying opportunity awaits
Despite its impressive gains, Coinbase stock has recently experienced a dip, creating a prime buying opportunity for investors. Crypto prices, and by extension Coinbase's stock, are known for their volatility, but short-term price swings shouldn't deter long-term investors. In fact, these dips often present the best opportunities to buy high-quality assets at discounted prices.
Crypto has come a long way since Coinbase reached its all-time high of $342 per share. While the path forward may include volatility, Coinbase has demonstrated the innovation and resilience needed to capitalize on the ongoing growth of the cryptocurrency industry. As the adoption of digital assets continues to grow, Coinbase is poised to benefit, making it a solid long-term option and a stock to buy like there's no tomorrow.
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RJ Fulton has positions in Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.
