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3 Reasons to Own Coinbase Stock – Motley Fool

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The market response to Coinbase’s (NASDAQ:COIN) third-quarter 2021 monetary outcomes was a little tepid. Coinbase was worthwhile, however income dropped from 1 / 4 earlier, and the corporate’s buying and selling quantity dropped as effectively. Consequently, the inventory took an 8% haircut the subsequent day.

As cryptocurrency costs rose throughout the third quarter and into the fourth quarter of 2021, administration indicated that income elevated. Nonetheless, buyers had rather a lot to digest, with income seemingly on the decline. As a long-term investor, there’s rather a lot to love about Coinbase’s enterprise nevertheless it takes a multi-year view of the corporate to see its true potential. 

Illustration of NFT transactions in digital space.

Picture supply: Getty Photographs.

Coinbase is a money circulation machine.

Regardless of the third quarter being down from a yr in the past, Coinbase nonetheless generated over $300 million in free money circulation. That is an unbelievable amount of cash in what can in any other case be seen as a disappointing quarter. 

COIN Revenue (Quarterly) Chart

COIN Revenue (Quarterly) knowledge by YCharts

One distinctive side of Coinbase’s enterprise is that it is a money circulation machine as a comparatively younger firm. Crypto continues to be in its infancy, and we must always see transactions and income develop in the long run. After all, one or two quarters will not make a development and buyers ought to count on huge volatility in Coinbase’s outcomes, however the truth that it is producing money when most newly public firms aren’t projecting constructive money circulation for years is a formidable feat.

The opposite factor to be bullish on is what Coinbase can do with that cash. Administration can make investments money generated into progress initiatives like NFTs and different start-ups, and I feel it is these investments that may make this a very iconic firm long-term. 

NFTs might be actually, actually huge

Coinbase has stated it’ll launch an NFT market, just like OpenSea or Rarible, on the Ethereum (CRYPTO:ETH) community. In keeping with administration, 2.5 million folks have signed up for updates by way of e-mail, two occasions the 230,000 customers who interacted on OpenSea over the previous month. 

Administration thinks that NFTs might be a much bigger enterprise for Coinbase than crypto buying and selling is at the moment and provided that $1.7 billion was transacted on OpenSea over the previous month that might be true. 

What Coinbase might do is make a fair greater market for NFTs, enabling creators to construct extra use instances than speculative artwork, as they primarily are at the moment. 

Coinbase is already a enterprise capital large

As buyers fret in regards to the ups and downs of Coinbase’s quarterly income, do not forget that this is likely one of the most prolific crypto/Web3/NFT buyers on this planet. Coinbase Ventures, the corporate’s enterprise arm, has over 200 firm investments in its portfolio, together with well-known firms like OpenSea, Uniswap, and Rarible. 

We do not know precisely what the worth of those firms will in the end be or how a lot Coinbase’s investments shall be value, however I feel it is clear that the corporate will possible have a stake in a few of the greatest winners in cryptocurrency. And people investments alone might ultimately be value billions of {dollars}. Do not sleep on Coinbase Ventures as a doubtlessly enormous worth creator long-term. 

Crypto and Web3 want a easy person interface

Let’s face it, the world of cryptocurrencies and what’s being known as “Web3” is difficult. The instruments concerned aren’t easy point-and-click techniques. They’re clunky and typically contain writing code immediately. Coinbase’s upside is in making these new ecosystems simple to make use of for creators and shoppers. 

Because the variety of cryptocurrency and NFT transactions grows, Coinbase has the potential to develop with the market. It is already confirmed that it may appeal to a big person base of 68 million folks and has a few of the most user-friendly instruments within the business. Now, it must increase on that basis. If it does, I feel this might be a multi-bagger for affected person buyers. 

This text represents the opinion of the author, who might disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even considered one of our personal — helps us all assume critically about investing and make choices that assist us develop into smarter, happier, and richer.

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