When it comes to investment opportunities, few sectors can match the levels of explosive potential seen in the cryptocurrency market. In just the past five years, the asset class has seen its value surge from just $170 billion to $2.5 trillion today.
At the forefront of this market stands Coinbase Global (COIN -7.68%), a company that has undergone a remarkable transformation and is poised for even greater heights in the years to come. With a closer look at Coinbase's trajectory and potential, it becomes evident why it could be the ultimate growth stock to buy with $1,000 right now.
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A new Coinbase takes shape
Coinbase's journey during the past year has been extraordinary. Despite its recent surge, the stock still holds tremendous potential for growth, fueled by the company's strategic initiatives and the broader crypto market's momentum.
One of the most significant factors contributing to Coinbase's resurgence is the dramatic transformation of its business model. Just two years ago, it relied heavily on transaction fees for income. In fact, at its worst, transaction fees constituted more than 90% of revenue. This reliance proved to be a liability when a crypto winter set in and activity on its platform dried up, causing it to post a monumental $1 billion net loss in the second quarter of 2022.
Recognizing its overdependence on transaction fees, the company has evolved into a multifaceted platform offering a variety of innovative income-producing products, such as subscription plans, custodial services, stablecoin interest, and staking rewards. As a result, transaction fees now represent just over half of its total revenue.
And it has forged a new international expansion strategy, increasing its reach to over 100 countries. With its newly established European headquarters in Ireland and the launch of an international exchange for derivatives trading, Coinbase is set up to expand its customer base and mature into the crypto leader, not only in the U.S. but also globally.
Yet the most impressive accomplishment is cutting expenses. Even with all of these new revenue streams, Coinbase has significantly reduced costs through remote work, staff reduction, and process automation, leading to a 45% decline from the previous year. Add it all up, and the 2023 fourth quarter was the company's first profitable quarter in nearly two years. More revenue, lower costs: a perfect formula for success.
A timely opportunity in the short term
Coinbase's revitalization couldn't come at a better time, with the cryptocurrency market continuing its rapid ascent. Despite the overall crypto market's rise by nearly 60% in 2024 alone, several indicators suggest that the market has yet to reach its peak. We can look at Coinbase for evidence of this.
During the last bull market peak in the fall of 2021, total trading on Coinbase's platform reached $548 billion. But the most recent data shows the company's total trading volumes are only slightly greater than the lows of the past bear market and far from peaks commonly associated with bull market frenzies. Showing little to no signs of slowing down, as the crypto market hurtles ahead, Coinbase should see its value rise in the near term.
Image source: The Motley Fool.
The long-term potential
Although the resurgence of crypto provides a timely opportunity, Coinbase truly begins to shine when evaluating its long-term potential. To see where it might be headed can help to show how far it has come.
Since 2018, its verified users have increased from 23 million to nearly 120 million, a 400% gain -- and with more users comes more revenue. In 2019, Coinbase generated about $533 million in revenue. According to the most recent earnings report, total revenue for 2023 reached $3.15 billion, a nearly 500% increase in just four years.
Should it maintain its growth trajectory across these key metrics, Coinbase could have more than 1.7 billion total users by 2034 and annual revenue soaring to nearly $100 billion. With its comfortable profit margins exceeding 85%, it could become as profitable as some of the world's most prominent companies, such as Alphabet or JPMorgan Chase.
This would be no small feat, but it can be easy to dismiss Coinbase's rise to these valuations. However, we can't forget how beneficial its relationship with crypto could be.
The internet is the only other comparison that comes close to capturing crypto's potential -- and we all know how that ended up. As cryptocurrencies become increasingly integrated into daily life, Coinbase's role should begin to take shape as a 21st century fintech offering retail and institutional investors an array of crypto-based products.
With its transformative initiatives, strategic expansion, and unparalleled growth potential, the company offers investors a unique blend of innovation and resilience. As the cryptocurrency market continues to evolve and gain mainstream acceptance, Coinbase stands out from the crowd as most deserving of a $1,000 investment today as it continues to ride the wave of crypto's growth.
