The largest crypto trading platform in the world coinbase recently went public to a direct listing under the ticker symbol of coin kathy wood. The ceo and cio of arc invest, has recently been loading in the coinbase stock and has even sold some tesla to purchase coinbase. She has even stated that she believes coinbase will easily return an equivalent or higher amount to tesla square roku, bitcoin and the entire genomic sector. In this video i will cover why kathy is extremely bullish on coinbase and whether you should be too welcome to cast gains academy if you're new to the channel.

Please consider subscribing for more content like this and let's get right into it. Kathy with's track record has been practically perfect ever since she started arc invest in 2014.. Therefore, when she's publicly bullish on a stock, we should at least consider why she sees a massive opportunity in the stock. Kathy is so bullish on coinbase that arc investor ready owns 807 497 shares of coin base, which is worth over 260 million dollars.

Today. This huge purchase of coinbase forced arkansas to sell a portion of the tesla position in order to purchase some coinbase stock in total ark sold over 179 million dollars with the tesla stock, which provided them with the necessary capital to purchase coinbase. Now, this isn't to say that arkhanvest doesn't believe in tesla anymore. Unlike a typical fund like berkshire hathaway arkan vest has restrictions on the amount of cash they can hold.

This is because arc invest. 5. Etfs are all active etfs which have stricter restrictions and other types of funds. Now that we clearly see that kathy wood is bullish on coinbase, let's take a look at why she's bullish and what the opportunity is.

If you haven't heard of or tried coinbase before, it's essentially a platform where you can trade borrow, lend out, store and distribute cryptocurrencies, it's one of the largest crypto exchanges in the world and is trusted by customers all over the world. In fact, coinbase owns 11 of the entire crypto market. There are a few crucial points that you must understand about coinbase to get the full picture. The main catalyst for coinbase over the next decade is the growth of the crypto economy.

The crypto economy is the complementary economy where people use crypto as an alternative to currencies supported by governments which are better known as centralized currencies. Most cryptocurrencies are decentralized, which means that no government can intervene with the crypto economy and as the crypto economy grows. So does coinbase what we're really seeing with cryptocurrency is the creation of a new financial system or economy, which we call the crypto economy. Think of the crypto economy as a complement to the traditional economy, it's more fair, more free and more global, because it's native to the internet and in the crypto economy, people are now performing every type of economic activity, including earning money spending it with merchants, borrowing and Lending raising money for their companies and, of course, investing to earn a return.

When coinbase first got started, we were a simple place for people to buy and sell bitcoin, but as the crypto economy has grown, coinbase has grown along with it, and we now have support for over 90 crypto assets and our customers can perform many different types of Economic activity outside of just trading today, coinbase is a trusted platform storing over 11 of all cryptocurrency in the world. Now you might be skeptical of exactly what competitive advantage coinbase has, after all, anyone can just create a crypto exchange right. The answer to that is: no. There are several reasons why coinbase has such a strong competitive moat over other exchanges.

The first and most important advantage is customer trust. Since the inception of coinbase in 2012, not a single person has lost any money in coinbase due to security breaches. These security breaches are quite common in the crypto world, in 2019, 12 crypto exchanges were hacked, which has led consumers to lose all their crypto holdings. Coinbase thins out of the crowd because of its exceptional cyber security team in our business, a trusted brand has meant developing a heritage of security and embracing a culture of regulatory compliance.

We have made significant investments in cyber security and are proud to be one of the longest running crypto platforms, where customers have lost no funds due to a security breach of the platform. Today, coinbase is serving customers in more than a hundred countries around the world. In the u.s, we're regulated by the department of treasury at the federal level and as a money transmitter by most state banking departments, another major advantage for coinbase is its bank partnerships with the main one being a partnership with jpmorgan chase. The bank allows users to purchase crypto with a service named chase, quick pay, which is literally free money for coinbase coinbase's.

Culture of compliance has enabled us to secure blue chip. Global banking partners like jp morgan and we are banked by five global, systemically important banks across the us and asia. These bank partnerships are essential because they allow us to provide a direct connection between the traditional fiat economy and the crypto economy. The last major advantage that coinbase has is this easy to use user interface platform, which has allowed coinbase to grow through word of mouth according to coinbase, ninety percent of all users sign up for coinbase purely through organic growth or word of mouth.

This is clearly one of the main reasons why kathy is bullish on coinbase. If you've seen kathy's portfolio, you might recognize a pattern most of the companies that she owns sell their product through word of mouth kathy, wood's largest positions such as square tesla and roku. Don't have to spend as much money on advertising as their competitors because the products sell themselves. This word of mouth growth matches exactly with coinbase's platform.

Now that we understand the opportunity of coinbase, let's go more in depth on why cathy wood is betting big on coinbase. The main reason why coinbase is getting the valuation it has right now is because of its blowout q1 2021 numbers, as you can see in this chart, coinbase generated over 1.1 billion dollars in 2020, which was up 136 from the prior year in the first quarter of 2021 coinbase made 2020 look like a total joke. The company generated 1.8 billion dollars in revenue just in the first quarter, which is more than coinbase's entire 2020 revenue when it comes to profit in 2020, coinbase generated 322 million dollars a profit again coinbase made. This look like a joke in the first quarter of 2021, as coinbase generated 765 million dollars of profit just in q1 of 2021..

These numbers make investors extremely bullish on coinbase, which definitely includes kathy wood herself before coinbase went public kathy would stated that her price target for coinbase was much higher than what she thought coinbase would be valued at. Yet she also warned about coinbase's volatility, as she stated that the price of coinbase stock is heavily dependent on the price of bitcoin. Do you have a price target for coinbase? We do um, i i am reticent to to give it. It is uh far above where it's going to open.

We think now there are a lot of assumptions in there and you want to talk about volatility. Um, just look at a chart of bitcoin, so there's there's going to be uh they're, going to be great opportunities between now and five years to buy on dips. We believe kathy wood is a long-term investor, but that doesn't mean she doesn't take advantage of dips. With that being said, since coinbase is volatile, she believes there will be plenty of buying opportunities just like how tesla did too now.

The primary growth driver for coinbase is the growth in institutional interest. This graph displays a total trading volume for coinbase over the past couple of years. The boxed portions show the volume of institutional trading that is occurring on coinbase back in 2018, there wasn't much institutional trading in coinbase. In q1 of 2018, only 11 billion out of 56 billion dollars of volume was from institutions which is 20 of the total volume.

As we can see, in 2020, institutional trading has spiked substantially. In q4 of 2020 institutional trading represented 64 of the entire trading volume. Clearly, a large transition is occurring, institutions are starting to take cryptocurrency seriously, and this benefits coinbase. In fact, when tesla purchased, 1.5 billion dollars of bitcoin, they actually used coinbase as more companies take crypto seriously, the institutional trading volume would just continue to grow faster and faster, which will subsequently lead coinbase to grow um.

We do believe, however, that it has miles to go because institutional interest in bitcoin alone, which is the largest crypto uh currency out, there is uh, we think, going to add uh up to five hundred thousand 000 to the price of bitcoin. And when i say that, we've based this on a study uh, focusing on what institutions are looking for, they're looking for low correlations of returns, this is a new asset class, so institutions are interested they are moving in and if uh, if they add up to five Percent in their asset allocation to uh to bitcoin, that alone could be up to 500 000 increase in the price uh. So we're at the very beginning of what we believe is going to be a long and exciting journey. As cathy just mentioned, institutional investors could lead bitcoin to go as high as 500, 000 and guess who's.

The beneficiary coinbase kathy would sees coinbase stock growing well over 15 per year in the next five years, which could mean anywhere from a 2x to a 10x return. What we do know is that cathy wood is extremely bullish on coinbase's potential. Okay, let me see if i can prod you a little bit more to give us specifics on on a price target for coinbase you're, reticent, to maybe give us a number. But can you give me a ballpark on the percent gains that you think you could see? You know using your your five-year approach uh.

This is well well above our minimum hurdle rate of return uh of 15. Even if it does open, i mean a 15 percent per year, even if it does open as high as 250 or 300, even at those prices. Given our assumptions now again, we expect tremendous volatility in this. It's going to be unstable, uh in terms of uh uh and investors and analysts understanding what coinbase actually is, unlike the clueless analyst that cathy was referring to, we can actually find out what coinbase is.

The majority of analysts miss tesla stock and the same could happen with coinbase. Coinbase makes money through two areas: transaction revenue and subscription revenue transaction revenue is the revenue created from the trading fees that coinbase charges when users buy and sell cryptocurrencies. On the other hand, subscription revenue consists of a fee rate for storing borrowing or lending cryptocurrencies transaction revenue makes up the majority of coinbase's total revenue right now we earn revenue from two main sources: transaction revenues and subscription and services revenue. Today, transaction revenues are our primary source of revenue.

We earn a fee each time our customers buy or sell cryptocurrency on coinbase. These transaction fees vary in general customers that trade higher volumes are charged lower fees. On average, our retail customers paid approximately 1.4 in 2020.. These fees reflect the additional value we provide to users such as integrated, secure asset storage and fraud prevention, while transaction revenue is the majority of coinbase's revenue.

Kathy wood believes that this is about to change when it comes to stock brokerages. The price of trade stocks has now dropped to zero dollars for most brokerage firms. Kathy believes that the same movement downwards and commission is likely going to happen with coinbase and other crypto exchanges, which could have implications for the future makes most of its money on on the trading of bitcoin and ether. Those are the two biggest and it's going into a lot of other cryptocurrencies and crypto assets.

So it's got a lot of open-ended uh, uh opportunities, but right now, uh they're, making about 70 basis points uh on each trade on each dollar traded and we think there will be fee compression, as there always is in uh in the institutional world and as competition Increases so i think the opportunities uh in this stock to the extent there are dips out there we'll come around the idea of oh, my goodness. How much is competition going to drive these fees down and we do think the compression will be to 50 cents within the next five years or 50 basis points, uh and so you'll watch the dynamic volume explosion fee compression, uh and again we'll pick our spots around Volatility essentially kathy would have saying that there will be lots of volatility in coinbase as fee compression occurs when investors start to realize that the transactional revenue decreases. This may lead coinbase stock to crash which could lead to a buying opportunity. Despite the potential for lower transactional fees, coinbase does have a unique opportunity to grow through increased trading volume and growing subscription fees.

According to coinbase's s1 filing subscription products grew 126 year-over-year from 2019 to 2020.. In 2020, the subscription revenue was likely close to 136 million dollars. Therefore, while transactional revenue makes up the majority of coinbase's revenue, it isn't the only revenue driver. Now we must go over.

Arguably the most important part, which is coinbase's valuation, as i mentioned earlier, the first quarter of 2021 was a blowout quarter for coinbase, based on the numbers coinbase produced in q1 of 2021. The stock is extremely undervalued. Coinbase is currently valued at roughly 85 billion dollars and coinbase generated 765 million dollars in q1 of 2021.. If we extrapolate coinbase's q1 revenue to the entire year of 2021, then we get an estimated net income number of 3.06 billion dollars at an 85 billion dollar valuation.

Coinbase is valued at a forward pde of just 27.. This is assuming that coinbase continues its stunning q1 performance for the rest of 2021, but either way a forward. Pde of 27 is extremely low. After all, coinbase grew its revenues by 327 year-over-year in the first quarter of 2021, so this is clearly a fast-growing business.

In this spreadsheet i projected coinbase's valuation with three different cases. The bool case is that in 2021, coinbase's net income and revenue continue at the same rate as the q1 2021 numbers. The base case is that in 2021, coinbase's net income and revenue continue at 75 percent of the q1 2021 numbers for the rest of 2021.. Lastly, the better case is that in 2021, coinbase's net income and revenue continued at 50 of the q1 2021 numbers.

Then i valued coinbase at a pde of 80 and a price to sales ratio of 30 in the bowling bear case, took the average of the two and then calculated the expected price per share. In the bull case. I got 882 dollars per share and in the bare case i got 691 dollars per share. These numbers will come in handy soon.

Lastly, for the bear case, i value coinbase had a pde of 50 and a price to sales ratio of 20 took the average of the two valuations and then got a price per share of 321. Then i assumed that there's a twenty five percent of the bull case happening a fifty percent case of the base case happening and a twenty five percent chance of the bear case happening by using these probabilities. I got a 20 21 price target of 646 dollars per share. Overall, i believe i used pretty conservative numbers and i got a price target much higher than the current valuation of roughly 325 dollars per share.

My projected rate of return is literally 100 in nine months. Overall, i do believe coinbase is extremely undervalued at its current price. Even in my beer case scenario, coinbase stock stays flat for the next nine months. I wouldn't be surprised if kathy would have reaching the same, if not even higher numbers than what i'm getting here.

If you do watch our trading, what you'll understand about arc is we're extremely opportunity. Opportunistic will by the dips uh, and we are also at the same time very optimistic about how far coinbase has to go in terms of uh delivering returns. Uh relative to our five-year target, uh so stay tuned. All right does it have four digits or five digits the price target? Well, if we're right, if we're right on where uh bitcoin is going just bitcoin alone, based on institutional investors getting involved and based on institutions, diversifying some of their cash into uh, bitcoin uh it.

It has a lot of room on the upside while kathy wood and myself are both extremely bullish on coinbase. None of us are financial advisors. So please do your own due diligence and invest at your own risk. With that being said, let me know whether you're bullish or bearish on coinbase stock.

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