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Coinbase: It's All Downhill From Here


Cryptocurrency trading platform Coinbase (NASDAQ: COIN) went public last week. After a few volatile days of trading, Coinbase was valued at around $65 billion as it started its first full week as a publicly traded company.

Coinbase generates revenue almost entirely from transaction fees. Revenue totaled about $1.3 billion in 2020, up 140% from the previous year. These transaction fees are quite lucrative: Coinbase generated net income $322 million last year.

Coinbase stock trades for a price-to-sales ratio of roughly 50 and a price-to-earnings ratio of 200. If the company were, say, a subscription software provider that was expected to grow at a quick and steady pace for many years, those ratios might make sense. But given Coinbase's business model, they're just about impossible to justify.

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Source Fool.com

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