Will Coinbase’s 825% free cash flow growth continue?


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

Jamie Louko: I’m going to speak about Coinbase (NASDAQ:CURRENCY). This is a company that I recently researched, but its financial performance over the past several quarters has absolutely blown me away. I’m sure most of you know what Coinbase does. It is a leading crypto trading platform. It has over $327 billion in assets traded quarterly and over 73 million users. It really shows that Coinbase is a major trading platform. One thing I like is that it serves businesses, in particular, what I like is hedge funds with Coinbase Pro. Why hedge funds? Why am I focused on this? I really think it helps in the expansion of crypto for individual investors. There are many investors who do not want to invest or do not know how to invest in crypto on their own. With Coinbase Pro, hedge funds can offer crypto in some of their investments in the future. I want to go for what I love most about this business, and it was truly a mind-blowing moment when I dug it. The growth of their income. This is the third quarter and these represent year-over-year figures. Revenue increased 330% year over year. Net profit increased more than 400% year over year. That’s 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% year-over-year growth. . This is completely crazy. But what I’m looking for next quarter, I want to see if these growth rates can continue. We’ve really had an explosion in crypto trading over the past year and a half. Now it’s starting to fade. Cryptos have sunk a lot in the past, and I want to see if they can continue that growth in a bearish crypto environment. In the fourth quarter, roughly half of November and December were relatively bad times for crypto. They fell for most of that time. I want to see if Coinbase is able to continue to show strong growth despite the crypto itself as Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO:ETH), things like that that fall. Another thing I want to see is progress on the Coinbase NFT platform. They seek to offer a competing platform to OpenSea. I just want to see feedback from management on what it’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 interests me. I want to know more.

Trevor Jennewin: Jamie, I like that choice. I’m just trying my luck here, but I bet Coinbase’s financial performance will be impressive. I think they do well during volatility no matter which direction the price is moving in, simply because volatility involves a lot of trading and they make a lot of money from trading fees.

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