Will Coinbase’s 825% Free Cash Flow Growth Continue?


In this clip from “The 5” on Motley Fool Live, recorded on Jan. 18, Motley Fool contributor Jamie Louko discusses whether growth rates can be sustained for the leading crypto trading platform amid a downward crypto environment.

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Jamie Louko: I’m going to be talking about Coinbase (NASDAQ: COIN). It is one company that I have just recently been looking into, but its financial performance in the past few quarters has just absolutely blown me away. I’m sure most of you guys are aware of what Coinbase does. It’s a leading crypto trading platform. It has over $327 billion in quarterly traded assets and it has over 73 million users. It really shows that Coinbase is a major trading platform. One thing I like about it is it serves enterprises, specifically, what I like is hedge funds with Coinbase Pro. Why hedge funds? Why am I focused on that? I really think that helps with the expansion of crypto getting into individual investors. There are a lot of investors out there that don’t want to invest or don’t know how to invest in crypto by themselves. With Coinbase Pro, hedge funds can offer crypto in some of their investments in the future. I want to go to what I like most about this company, and it was really a wow moment when I was digging through it. Their revenue growth. This is the third quarter and these represent year-over-year figures. Revenue grew 330% year-over-year. Net income grew over 400% year-over-year. This is for the first nine months of 2021. They had over $7.7 billion in free cash flow for the first nine months, and that was over 800% growth year-over-year. That is absolutely insane. But what I’m looking for going into the next quarter, I want to see if these growth rates can continue. We’ve had an explosion in crypto trading the past year and a half really. Now it’s starting to die down. Cryptos sank a lot in the past, and I want to see if they can continue that growth in a downward crypto environment. In the fourth quarter, about half of November and December were relatively bad periods for crypto. They were falling for most of that period. I want to see if Coinbase is able to continue putting up strong growth numbers despite crypto itself like Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), things like that falling. Another thing I want to see is progress on the Coinbase NFT platform. They’re looking to come up with a competing platform against OpenSea. I just want to see management’s comments on what that’s going to look like, if it’s going to be able to be integrated with Coinbase accounts and things like that. Just a very interesting thing that I’m curious about. I want to hear more about.

Trevor Jennewine: Jamie, I like that pick. I’m just taking a stab here, but I bet Coinbase’s financial performance will be impressive. I think they do well during volatility, regardless of which direction the price is moving just because volatility implies a lot of trading and they make a lot of money from transaction fees.

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Jamie Louko owns Ethereum. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin, Coinbase Global, Inc., and Ethereum. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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