Key Morningstar Metrics for Coinbase
- Fair Value Estimate: $150
- Morningstar Rating: 1 stars
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: Very High
What We Thought of Coinbase’s Earnings
Surging cryptocurrency prices drove a dramatic improvement in Coinbase’s COIN results, with total revenue up 138% from last year to $2.3 billion. Net income increased to $1.3 billion from $273 million last year, though this does include $357 million in after-tax gains on cryptocurrency holdings.
Why it matters: Despite revenue more than doubling, Coinbase’s shares are effectively unchanged in after-hours trading as the market came in with high expectations. Coinbase’s business is highly correlated with cryptocurrency prices and given its recent performance a strong quarter was inevitable.
- Coinbase’s retail traders, its largest source of revenue, are typically attracted by major upswings in cryptocurrency prices. Additionally, Coinbase’s fees are charged as a spread of the trade value, creating a direct connection between cryptocurrency prices and its trading revenue.
- Since the election, cryptocurrency prices have risen sharply, with year-end market capitalization increasing by 98% in 2024 to $3.4 trillion. This drove a 194% increase in transaction revenue to $1.56 billion.
The bottom line: We expect to increase our fair value estimate for no-moat Coinbase by low to midteens, primarily due to higher stable coin and trading revenue projections. Despite the increase, we still think the shares are overvalued as the market is pricing in too much growth.
- Since the presidential election the market has repriced Coinbase dramatically higher due to rising cryptocurrency prices and prospects for a more favorable regulatory environment.
- However, cryptocurrency prices are inherently volatile, and we caution against extrapolating too much additional growth on current valuations. Additionally, while regulatory clarity provides immediate benefit to Coinbase, it will also likely lead to more competition over time.
Key stats: Coinbase generated 19% of its revenue from outside the US, up from 16% last year, as the firm’s international investments are showing returns.
Coinbase Stock Price Versus Fair Value Estimate
Coinbase Stablecoin Revenue
Coinbase generates stablecoin revenue through the interest earned on the collateral behind the stablecoin USDC. As a result, the firm’s revenue is a function of USDC’s market capitalization and interest rates, subject to the specifics of its economic partnership with Circle. While not fully reflected in the fourth-quarter results, the tail end of 2024 into 2025 has been excellent for USDC, with its market capitalization rising more than 60% since the end of October to over $56 billion today.
With expectations for future interest rate cuts also diminishing in recent months, prospects for Coinbase’s stablecoin revenue have been substantially enhanced. While trading revenue is extremely volatile, with shifts in cryptocurrency prices and volatility driving significant swings in revenue, Coinbase’s stablecoin business has proven to be more stable. We see the improved trajectory and strong momentum of USDC as a major win for Coinbase following the challenges USDC faced in the aftermath of the failure of Silicon Valley Bank.
As expected, Coinbase’s success in winning the majority of bitcoin ETF custodial business has proven to have had a modest impact on revenue. Custodial fee revenue increased 119% to $43.1 million. While the growth rate in percentage terms is impressive, Coinbase’s custody business is still far too small to meaningfully move the needle for the company as a whole.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
