Should you Buy Coinbase Stock? **(Watch BEFORE Noon April 14)**

hey everyone me kevin here in this video

i'm going to give you my strategy for

investing in the

coinbase direct listing which happens

tomorrow

on april 14th 2021 and

in this video i'm going to give you my

price targets and my strategy so

if you are a regular person following

along and you lose money it's your fault

if you make money

well congratulations and if you're a

hedge fund and you front run me and make

it not possible for me to do this

you suck all right folks now that you

know that this video is for

entertainment purposes well

this video is for entertainment purposes

only and don't sue me bro if you lose

money

let's get into some of my conclusions

okay first things first

obviously by this point you should

already know what coinbase is we're not

doing an introduction on coinbase i

already did a first impressions video of

coinbase

we're getting right into the numbers on

this first

there's obviously a massive massive

adjustment that has happened

from transactional revenue at coinbase

and there are two big forms of

revenue at coinbase and this is where

you really have to pay attention to the

company

because you have to know these two

different forms of revenue and where

they come from

so the big form of revenue number one is

transactional revenue i go in there i

buy bitcoin

i sell bitcoin i go in there and i send

somebody bitcoin and i pay a fee or i

receive bitcoin or whatever and their

fees charge

that's transactional revenue whereas

subscription and service revenue

has to do with saving borrowing lending

staking building distributing storing

and paying

so the light blue right here is where

growth is coming to coinbase

at the same time as growth is coming to

the transactional revenue side

and i'm talking about a lot of growth

this right here is the income statement

for coinbase you'll see that the revenue

ended 2020 is 1.14

billion dollars and their other revenue

which would be like those services and

subscriptions was 136 million dollars

now what you can do because this is the

year ended

2020 so you can now jump on over to the

8k and you can see that

in the first quarter of 2021 their

revenue went up to

1.8 billion dollars with a net income of

about

between 730 to 800 million dollars that

730 to eight mil will become important

or 800 million will become important in

a moment

but the big thing here is we can then

determine that this total number right

here

is going to be about 1.8 billion dollars

but the beautiful thing is they also

gave us an indication that the net

income

number should be somewhere between 730

and 800 million dollars

which if i have this top number and i

have this bottom number

and they even tell us about how much

money they're going to spend in taxes

it makes it a lot easier for me to fill

in what's in between

especially since i know that their

motivations are to start spending up to

15

per year in advertising going forward

maybe not this year in 2021 but in the

long run going forward

so i have all of the pieces of the

puzzle that i really need to try to make

some projections

out to say 2024 on this company and i'm

going to come up with a

bare base and bull case scenario for

this company

and i'm using information that i

collected from the report

like 15 advertising going to 15 if you

look right here

advertising is not at fifteen percent

right now you'll see just sales and

marketing right here

which is 56 million dollars that ain't

15 percent

of 1.2 billion dollars so we've got a

little bit of work to do now i'm going

to spare you of a lot of the details

in fact in my stocks and psychology of

money course i put together a

49-minute breakdown of how i came up

with what i'm about to show you and i'm

just going to give you the bottom lines

and if you want to learn how i do these

things well obviously the program is

linked down below for you but let's

focus on the bottom lines because that

might be why you're here so

now we've got a little bit of insight

that insight i just gave you is going to

be really important for understanding

these bottom lines

so first things first the private

valuation for this company is

90 billion dollars which puts it at a

share price of about 344

i do not expect that coinbase is going

to sell for anything

even close to the private valuation of

344

it's wishful thinking it's a dream it's

kind of like

the listing reference price of 250

dollars per share

it's a joke you're not getting coinbase

for 250 a share

and if you can either i screwed up on my

analysis or buy the crap out of this

okay it's that simple if you could get

this for 250 a share

stop watching right now buy

okay unless crypto has gone to zero all

right the street values this at closer

to a hundred billion

dollars which means we should easily see

this 250 price

go to 383. like this is like this 250

thing is like a one dollar auction on

ebay it's fugazi

whatever however you want to pronounce

it it's a load of crap okay

uh this this not unlikely notice i said

not

unlikely not not likely anyway not

unlikely it would not be unlikely for

coinbase to double

tomorrow which would put it uh above the

streets valuation would not surprise me

there's gonna be a lot of euphoria and

buying pressure on this that puts it

around a share price of 500

that would not be unlikely now is that a

fair deal well let's talk a little bit

more

first a very very rudimentary way you

can compare

is you could just look at different

valuations well stripe is valued at say

i think stripes around 90 billion

dollars in the private

market which is kind of where coinbase

sits

uh and so okay we think it's probably at

least that right

robin hood right now in the private

market's worth somewhere between 40 to

60 billion

it's probably going to be worth like 90

to 100 billion paypal

is worth 322 billion squares worth 124

billion

sofa is super tiny that thing's worth i

think like 15 or 16 billion dollars but

it's

tiny relative to the amount of uh

monthly transacting users

uh and so what i want to do is you know

that's that's just a really rough way of

kind of comparing looking at some comps

but instead what i want to do is i want

to look at a bear case scenario

a base case scenario and a bull case

scenario and i know this looks like a

lot of numbers but it's really really

simple i'm going to make this really

fairly easy for you

so all i'm going to do is i'm going to

show you the bottom lines here again

if you want to know the details i've got

a course where i teach exactly how i

break these things down

and that's a link down below and you can

use that coupon code as well but let's

just get to the bottom lines

so what i did is i did a bear case

scenario for coinbase

and i took something that wall street

talks about every freaking day

and the mainstream media is drilling

coinbase for

they're like hey well isn't there going

to be a race to the bottom

in transactional revenue what happens

when everybody sets their commissions to

zero

and coinbase gets screwed because they

can't charge those big fat fees anymore

and i go fine zero i will literally set

your transactional revenue to

zero and that's my bear case scenario

wait a minute kevin how do they make

money have you set that to zero

well i'm projecting out to 2024 and i'm

assuming

a 70 growth rate see

1.7 1.7 1.7 1.7 uh times

their current services and other revenue

of 162 million

so i'm literally taking zero

transactional revenue and and

assuming 70 growth in their other

revenue

for four years the last growth that they

had

was a hundred and twenty six percent for

other revenue and here's the cool thing

and this is straight from their

s1 like you could read it yourself it's

in there there's a segment in their s1

that says of the customers uh of the

of all the customers they have 21 of the

customers

use other products those other services

and other revenue

segments when they use those other

revenue segments

the income coinbase gets per customer

goes up 91 basically

if you touch any other product coinbase

has

other than just transacting let's say

cryptocurrency

you literally and essentially

double the revenue that coinbase makes

off you

so you want to double the amount of

money coinbase makes off you just use

some of the other products they have

and it's fine like we want companies to

make money but the point is that

segment has the real potential to

explode

and i don't think wall street i think

wall street's gonna be stuck on this

transactional revenue number

and if you extrapolate this extra this

transactional revenue number

dude coinbase the moon like if you

literally just take the growth we saw

from 2020 to q1 2021

and you take that transactional revenue

you go yo this is going to the moon

which i don't think it is i think that

number is going to come down over time

uh then then you could literally say

this is a 1200

company easily like you could you could

easily make the case for that if you

just use transactional revenue

i i'm a conservative investor i'm gonna

put zero dollars here okay

i don't like a lot of risk so i'm

putting zero dollars here and i'm

assuming seventy percent growth over

here

uh then i'm also going to assume that 15

marketing budget and i'm gonna

extrapolate some of the other numbers

from prior years

again if you want my explanation for how

i craft these spreadsheets

link down below okay operating income so

that brings me to operating income

in my bare case of about 635 billion

if i take off a provision for taxes

which i use

taxes that they give in fact you could

see that over here the 8k

2021 uh i assume

taxes of about 250

dollars which just so you can fact check

that really quickly

take a look at this so look at this

really quick see operating income i got

to and this is where i did my

extrapolation from

operating income about a billion dollars

provision for income taxes 250 million

net income about 758 million for q1 2021

right

if i go over because we don't actually

have that info yet we only have

rough estimates uh when i look over here

the three months ended 2021 we'd have

net income between 730 and 800

uh and taxes paid between 260

and 225 with some miscellaneous

adjustments stock based compensation

things like that here

i generally ex i keep these things

simple so i can extrapolate a little bit

uh and those are the numbers that i'm

using over here to extrapolate off of

i'm removing the stock based

compensation as those are things that

come with fluctuations

it's not worth even having a

conversation about right now anywho and

keep in mind all this information is

based on a

quarter so we get a net income in the

2024 figure

of approximately 476 million dollars

if that ends up being true then we can

go over here to this

bare case projection right here and we

get an annualized net

which is just basically taking that

number times four divided by the shares

outstanding gives me earnings per share

of

7.3 then i have to make an assumption

i'm going to assume

a 80 times earnings multiple

in 2024 which i think that's reasonable

because if i go over here

take a look at what some of these

companies are selling for uh to 2022.

tesla's like 111 end phase 55 square 141

peloton 141 pound tier 114 etsy expi

nvidia are down in the 40s and 50s range

i think 80 is

reasonable for coinbase projecting to

2024. so i think this is very reasonable

and if i use that estimate for my bear

case

i get to a price target of about 584

dollars

which means if i pay 400 for the stock

today

i'd get about a 9.93 compounded annual

return for those four years

in my bare case scenario assuming

transactional revenue goes to

zero okay now what i did

is i did the exact same thing for my

base case

and my bull case except the difference

between my base case

and my bull case is simple and the bear

case so in a bear case i use

transactional revenue zero in my

base case i did transactional revenue in

2024

at 50 of what the transactional revenue

is

in q1 2021 so i'm literally assuming

between q1 2021

and 2024 that transactional revenue

falls 50 because of price competition or

whatever

this gives me a net income of 678 mil

and then in my bull case scenario i

assume that transactional revenue stays

flat so q1 to 2024 q you know the entire

2024

annualized we stay flat so it literally

in none of my scenarios price any growth

in for the next four years in

transactional revenue but they still

include that 70

growth in that non-transactional revenue

which is really really important

okay if i put both of those scenarios in

here take a look at what we get

so we zoom in over here we get eps here

are the different eps's

if we want to pay 80 times earnings this

is the result we get we get a price

target of 830

to 1076 in 2024

depending on which scenario you look at

which means if i pay 450 or 500

today i would expect either a 16.55 or a

21.14

annual compounded rate of return so

folks

bottom lines okay again if you want to

understand

all the nitty gritty of everything that

i did there and i give you the

spreadsheet and everything

this is the kind of stuff that i like to

teach in my fundamentals of

stocks and psychology of money program

it's in that program already it's live

already

so here are the bottom lines the best

buy

for this company in my opinion is buying

this company under

four hundred dollars i don't think it's

going to happen but if you buy it under

400

you're able to assume zero transactional

revenue

80 times earnings in four years because

this company's still going to be growing

so 80 times earnings in

in four years i think is very reasonable

for a company that's still going to be

growing

15 percent ad spend 70 growth in

non-transactional revenue

and you'll take that 400 dollars to 584

and you'll have that internal rate of

return of around 10

that's not bad for a bear case scenario

so in other words

if you're bullish and you can get this

under 400

load the boat is my take okay

bear case if you buy it under 450

uh same thing except 50 transactional

revenue still 70

growth for non-transactional 80 pe four

years growth continuing blah blah blah

blah

that gets you about the sixteen point

five five percent

internal rate of return that's good and

then if you're super bullish you buy it

under

five hundred dollars uh and this assumes

this assumes transactional revenue stays

flat so

very very very simple concise bottom

line

in my opinion and don't sue me bro if

you lose money it's your fault if you

lose money this is my analysis and it

could have been totally wrong

you buy coinbase under hundred dollars

very heavily

it's unlikely to happen you buy up to

three percent of your portfolio of coin

base up to four hundred

fifty dollars so you buy moderately up

to four hundred fifty dollars

heavy might be like five percent uh

three percent of portfolio up to say 450

and if it goes up to 500 maybe one

percent of your portfolio

if it goes over 500 it really depends on

my mood and how interested i am in

paying a premium for this

if it goes over six hundred dollars

forget it

lulls gg congratulations coinbase

i'll buy you on the dip there you go

that

is a bottom line uh strategy

that i have for coinbase took me a few

hours actually it probably took me

somewhere around

nine hours now to put all this together

usually these these deep fundamental

dives take quite a while to put together

so hopefully you appreciate this very

condensed version

that i've been studying over the past

few a few weeks here

hopefully appreciate it if you did

consider subscribing consider sharing

let me know what your comments are down

below if i missed something let me know

and folks see in the next one thanks for

watching bye

[Music]

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