Coinbase (NASDAQ:) operates internationally as a leading provider of end-to-end financial infrastructure for the “crypto-economy.”

Coinbase offers retail customers access to an extensive financial account that can be used for crypto-economy. Large institutions have access to a market with sufficient liquidity and a marketplace where they can safely trade crypto assets.

Additionally, it offers services that enable institutions to develop crypto-based applications and securely accept crypto assets for normal payments.

Coinbase went public in April. The stock has performed poorly since then. Shares have dropped from about $330 per stock to just $230 since April’s IPO. (See COIN stock charts on TipRanks)

This is likely attributed to investors, especially institutional ones, questioning the company’s long-term success in the context of future regulation. Coinbase may be a risky investment but it is still a good stock to invest in.

Regulatory Pushback

On September 20, Coinbase stated that it would not proceed with its Lend program, shortly after the Securities Exchange Commission warned to sue with a Wells notice.

A few days later, news came out that the company is working on a pitch to federal regulators on how to supervise the crypto industry. Even if Coinbase convinces regulators to approve its Lend program which may be a major source of new revenues, there is no clear picture in this area.

Only Half the Picture

Regardless of such concerns, there is strong reasoning behind a bullish case.

First, it is important to recognize that crypto-economy will continue to thrive. Coinbase leads the way in securing crypto assets for institutions.

As the company revealed in its most recent shareholder letter, institutional volume comprised 69% of total trading volume in Q2, up from 64% in Q1. It is clear that institutions trust Coinbase. Coinbase is also the only publicly traded company in the space, giving its clients the transparency and accountability they require.

Coinbase, being the only publicly traded company within the sector, has the advantage of accessing lower financing than its peers. This further strengthens its competitive edge.

Both the revenues and net income increased 1,042.1% year over year to $1.6billion and 4,918.8% respectively.

Coinbase’s frictionless business model means that there is no extra operating cost. The net margins are huge. Although revenues increased due to volatility, it is reasonable that the stock remains undervalued. The company uses the $1.6 billion in net income per year on a rate basis ($6.4 billion/annum).

This stock has a market capitalization of $48.6 million, which implies that it is worth 7.6 times its P/E. Even if it did not increase its net income from the rapidly expanding crypto- and NFT markets, this would still be an extremely low multiple.

Simply put, the company has an advantage when it comes to future funding, trust development and trading safety.

Wall Street’s Take

Turning to Wall Street, Coinbase has a Moderate Buy consensus rating, based on 12 Buys, three Holds, and one Sell assigned in the past three months. At $351.50, the average COIN price target implies 53.3% upside potential.

Disclosure: As of the publication date, Nikolaos Sismanis owned stock and held a positive long position in Coinbase shares.

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