Coinbase Global Stock: Buy, Sell, Or Hold?

Coinbase Global's (NASDAQ: COIN) stock more than doubled over the past 12 months. Most of that growth was driven by the warming cryptocurrency market, which attracted more investors as interest rates declined. President Trump's electoral victory amplified those gains as his more crypto-friendly administration took over.

But is it the right time to buy, sell, or hold Coinbase's stock right now? Let's review its business model, growth rates, and valuations to decide.

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Looking back at Coinbase's boom-and-bust cycle

As one of the world's top cryptocurrency exchanges, Coinbase generates most of its revenue from transaction fees and thrives when more investors are actively trading cryptocurrencies. In its latest quarter, three tokens -- Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Solana (CRYPTO: SOL) -- accounted for 35%, 16%, and 11% of its trading revenue, respectively. The rest came from other crypto assets.

Coinbase's revenue soared 514% in 2021 as low rates, stimulus checks, and social media buzz pulled more investors toward the crypto market. But in 2022, its revenue plummeted 59% as rising rates burst that bubble. That downturn became a "crypto winter," which wiped out many of the smaller coins. Its revenue dipped 3% in 2023 as the crypto market stayed chilly.

What happened to Coinbase over the past year?

Coinbase's trading volume and total revenue rose sequentially in the third and fourth quarters of 2023 as declining interest rates finally thawed the frozen crypto market. That momentum continued in the first quarter of 2024, with the approvals of Bitcoin's first spot price ETFs and the anticipation ahead of its "halving" in April (which reduces the rewards for mining Bitcoin in half every four years) generating a lot of buzz and bringing in new investors.

Data source: Coinbase.

But that euphoria dissipated in the second and third quarters as investors fretted over the Federal Reserve's slower-than-expected rate cuts and the uncertain outcome of the U.S. presidential election. Bitcoin dropped back to the $50,000 range by September as those worries intensified, but it's more than doubled above $100,000 since then.

For 2024, analysts expect Coinbase's revenue to rise 90% to $5.9 billion as declining interest rates, President Trump's victory, and the growing adoption of Bitcoin, Ethereum, and other top cryptocurrencies by institutional investors herald the beginning of a new "crypto summer." For 2025, they expect its revenue to rise 5% to $6.2 billion as it laps that robust recovery.

As Coinbase navigated the volatile market, it focused on cutting costs to stabilize its business. As a result, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) stayed positive over the past seven consecutive quarters. Analysts expect its adjusted EBITDA to surge 196% to $2.85 billion in 2024, but stay nearly flat in 2025 as it focuses on expanding its platform with new features again in a warmer market.

Is it the right time to buy, sell, or hold Coinbase's stock?

With an enterprise value of $65.4 billion, Coinbase trades at about 11 times next year's sales and 23 times its adjusted EBITDA. Those valuations are reasonable relative to its growth rates, and it's well poised to expand over the next few years.

We should take analysts' estimates for Coinbase with a grain of salt, since they're still tethered to the unpredictable crypto market. But if you believe crypto will warm up again, it could be a great stock to buy and hold for the next few years. If you don't have high hopes for crypto, you should simply sell or avoid it.

I'm personally more bullish than bearish on Coinbase, but I also think it makes more sense to simply invest in Bitcoin or other leading cryptocurrencies on Coinbase's platform instead of investing in its capital-intensive business.

Should you invest $1,000 in Coinbase Global right now?

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Ethereum, and Solana. The Motley Fool has a disclosure policy.