Coinbase Global (COIN 7.19%) is a leading cryptocurrency platform. It started in 2012 to provide anyone, anywhere, with the ability to easily and securely send and receive Bitcoin (BTC 0.55%). Today, it allows anyone to invest, spend, save, earn, and use a variety of cryptocurrencies.
The company has developed several products and services to encourage more people to use cryptocurrencies. Its digital wallet, Coinbase Wallet, lets users store and manage all their crypto, non-fungible tokens (NFTs), and other wallets in one place. Meanwhile, its trading platform allows users to buy, sell, or HODL (hold for the long term) cryptocurrency. The company's smart contracts allow users to trade their crypto for fiat currency like the U.S. dollar (through USD Coin (USDC -0.0%), a stablecoin redeemable for U.S. dollars on a 1:1 basis).
Coinbase has a bold goal. It aims to build trusted and easy-to-use products and services to bring more than 1 billion people into crypto. The company wants to develop more uses for crypto beyond trading so that more people will use it for more things, expanding its ecosystem.
The potential of crypto might have you interested in investing in Coinbase. You might already be a user of its platform. Here's a step-by-step guide on how to buy the crypto stock and some factors to consider before adding the up-and-coming company to your portfolio.
How to invest
How to buy Coinbase stock
Investors interested in buying Coinbase stock have to take a few steps before becoming a shareholder. Here's a step-by-step guide to adding the cryptocurrency platform to your portfolio.
1. Open a brokerage account
You'll want to open and fund a brokerage account before buying shares of any company. If you need to open one, here are some of the best-rated brokers and trading platforms. Take your time to research the brokers to find the best one for you.
2. Figure out your budget
Before making your first trade, you'll need to determine a budget for how much money you want to invest. You shouldn't invest money you expect you'll need in the next three to five years (like money for a down payment on a home). You'll then want to figure out how to allocate that money.
The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years. You don't have to get there on the first day. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then grow from there.
3. Do your research
It's essential to thoroughly research a company before buying its shares. You should learn about how it makes money, its competitors, its balance sheet, and other factors to make sure you have a solid grasp on whether the company can grow value for its shareholders over the long term.
4. Place an order
Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:
- The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
- The stock ticker (COIN for Coinbase).
- Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the market price.
Once you complete the order page, click to submit your trade and become a Coinbase shareholder.
Should I invest?
Should I invest in Coinbase?
It's essential to thoroughly research a company before buying shares. You might uncover something about the company that changes your mind. On the other hand, the research process might firm up your conviction that the stock has the potential to be a high-return investment.
There are a lot of factors you should consider when researching a stock. Here are a few reasons why you might want to purchase Coinbase shares:
- You believe cryptocurrencies will play an increasingly important role in the future.
- You actively trade cryptocurrencies through Coinbase's exchange.
- You're convinced that Coinbase stock can outperform the S&P 500 over the next three to five years.
- You believe that Coinbase can grow its revenue and earnings briskly in the future.
- You're seeking a high-upside investment opportunity.
- You understand the risks, including the possibility that Coinbase stock will likely remain volatile and could continue losing money.
- You understand Coinbase's business model and how it makes money.
- You understand the difference between crypto and stocks.
- You believe that Coinbase will eventually grow into its lofty valuation.
- You like to invest in founder-led companies.
- Adding Coinbase would help you build a more diversified portfolio.
- You don't need dividend income from your investment.
Dividend Income
On the other hand, here are some factors that might lead you to opt against buying shares:
- You're not exactly sure how Coinbase makes money.
- You don't hold any cryptocurrency and don't intend to get into the space.
- You're not convinced that cryptocurrencies will become mainstream investments.
- You don't think crypto has many uses other than trading.
- You're unsure whether Coinbase will be consistently profitable.
- Your portfolio is already heavily concentrated in cryptocurrencies and other crypto stocks.
- You're seeking investments with less volatility than Coinbase stock.
- You're at or nearing retirement and need investments that generate income.
USD Coin (USDC)
Profitability
Is Coinbase profitable?
Digging into a company's profitability is an important aspect of an investor's research process because increasing profitability is typically the biggest factor driving a company's stock price over the long term. With that in mind, here's a closer look at Coinbase's profitability.
The cryptocurrency exchange finally seemed to turn the corner on profitability by mid-2024. It posted $36 million of net income in the second quarter on almost $1.5 billion of total revenue. Meanwhile, its profits totaled $1.2 billion in the first half of the year, a stark improvement from a $176 million net loss in the prior year period.
The company has dramatically reduced losses by improving its financial discipline. Its spending on technology and development, as well as general and administrative costs, has decreased meaningfully, with the latter driven by a large decline in its headcount.
Coinbase needs to continue keeping a tight lid on expenses. It also will need to see its revenue start growing again. Those two factors would enable the company to grow its profitablity, which could drive its stock price higher over the long term.
Dividends
Does Coinbase pay a dividend?
Coinbase had not started making dividend payments to its shareholders as of mid-2024. The cryptocurrency exchange doesn't intend to begin paying dividends in the foreseeable future. It has just turned the corner on profitability and needs to retain earnings to fund its operations and continued expansion.
Digital Wallet
ETF options
ETFs with exposure to Coinbase
Investors don't have to directly invest in Coinbase stock to gain exposure to the cryptocurrency platform in their portfolio. An alternative strategy is to passively invest through a fund that holds its stock. One of the most common passive investment vehicles is an exchange-traded fund (ETF).
According to ETF.com, 157 ETFs held 14.6 million shares of Coinbase as of mid-2024. The biggest holder was Cathie Wood's Ark Innovation ETF (ARKK 4.17%). The ETF had more than 2.3 million shares. It was the fund's third-largest holding at 8.4% of its total value, making it a solid way to gain exposure to Coinbase and other leading growth stocks.
The First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT 5.32%) had an even higher allocation to Coinbase at 18.6% (its second-largest holding). That high allocation makes this ETF an option to consider for those seeking meaningful exposure to Coinbase and other players in the crypto sector through a passive ETF investment.
Stock splits
Will Coinbase stock split?
Coinbase didn't have an upcoming stock split as of mid-2024. The cryptocurrency exchange had not completed a stock split since its direct listing on the Nasdaq Exchange in 2021. It likely won't split its stock soon. Shares of Coinbase had lost more than 40% of their value from their direct listing price by mid-2024. The crypto platform would need to more than recover from the decline before splitting its stock.
Related investing topics
The bottom line on Coinbase
Coinbase is a leading cryptocurrency platform. That puts it in an excellent position to capitalize on the growth it sees ahead as more people use crypto for more things. Increasing crypto usage would help grow the company's revenue, potentially enabling it to finally turn the corner on profitability and helping drive significant stock price gains in the future.
However, it could continue to be a bumpy road for Coinbase. Cryptocurrencies have proven to be very volatile, which has affected its revenue. Investors need to ensure they understand the risks before investing in Coinbase stock.
FAQ
Investing in Coinbase FAQ
Is Coinbase a sell or hold?
Coinbase has lots of potential. The company is building a platform to support more than 1 billion people using crypto for more than just trading in the future. That could enable the company to eventually make a lot of money from its crypto-related products and services.
However, its shares have lost significant value since their direct listing in 2021. It's definitely a higher-risk stock.
More risk-tolerant investors who believe Coinbase can deliver on its promise could do well in continuing to hold for the long term. However, more risk-averse investors might want to sell and consider investing in a lower-risk company with a greater probability of delivering positive returns.
What is the forecast for Coinbase stock?
Over two dozen research analysts cover Coinbase stock. The average analyst rating was "hold" in mid-2024 (14 out of 28). Analysts' consensus 12-month price target for Coinbase stock was $262.50 per share (with shares trading at more than $190 at the time). The highest forecast price was $400, while the lowest price target was $160 per share.
Matt DiLallo has positions in Ark ETF Trust - Ark Innovation ETF. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
