Coinbase’s (COIN) expected valuation has soared from ~$8 billion in late 2018 to ~$100 billion currently. While no official date has been provided, Coinbase is expected to go public via direct listing in early March 2021. With a rapidly rising valuation, driven by rising interest in cryptocurrency, I do not think investors should expect to make any money in this stock.

At the rumored valuation of ~$100 billion, the stock will earn a neutral rating. Coinbase achieved profitability in 2020, which is encouraging, but the expected valuation implies the company will become the largest exchange in the world by revenue. It’s hard to make a straight-faced argument that the firm can justify the lofty expectations baked into its valuation given:

* Competition is increasing in the cryptocurrency trading market.
* Neither its current market share or margins are sustainable in a mature cryptocurrency trading market.

The lack of traditional IPO process makes it difficult to predict where shares will open, especially as Coinbase shares have traded from $28/share to $373/share in private markets since early 2020. Nevertheless, a valuation at the rumored levels is far too high, and investors should not buy this stock at anywhere close to the rumored levels.

This report aims to help investors sort through Coinbase’s financial filings to understand the fundamentals, using more reliable fundamental data, and valuation of this upcoming direct listing -

    Revenue Growth Leads to Profits (For Now)

    Growing Market Share in Nascent Cryptocurrency Market

    Institutional Users Are Increasingly Driving Volumes

    A Mature Market Could Crush Profitability by 98%

    Cryptocurrency Market Remains Niche Despite Recent Headlines

    Coinbase Is Priced to Be the Largest Exchange (by Revenue) in the World

    But What If Coinbase Is Not the Largest Exchange in the World?

    IPO/Direct Listing Is Not Without Warning Flags

    Concentration Risk is Large

    Non-GAAP EBITDA Overstates Profitability

    Emerging Growth Company Designation Means Less Transparency

    Critical Details Found in Financial Filings by My Firm’s Robo-Analyst Technology