Hey boys and girls: this is tom. Welcome back to another video. If this is your first time here buckle up just about to get bumpy, so we absolutely have to talk about the coinbase quarterly financials q2 financials came out yesterday and everybody were blown away. They managed to exceed even the highest of expectations, but in today's video i want to put some brakes on this car because it's not always as good as it seems, and you have to understand that this is coming from a guy who sees a 100 potential in This company, as far as future potential growth, i'm not a hater, i'm a lover, in fact, i'm a general in the army of coinbase love.

In any case, on april 22nd, i put out a video, and i told you hey. I think that this is way higher than the 250 company. My valuation was between 100 and 180 billion dollars for this company. It may remind you even right now, with 270 per share.

We are about 50 to 60 billion dollars in valuation. So clearly, i see a lot of upside here. However, however, i want to put some perspective on these numbers, which we just got, because they are phenomenal now they're phenomenal. If you compare it to last year's q2, i mean it's literally everything just 10x they're, even really good, when you compare it to q1 of this year.

However, there's a lot of things here that kind of needs context to understand that this company isn't about to 10x itself every year, it's going to be a slow process, and since it's dealing with cryptocurrency, it's going to have a lot of volatility. There's a lot of associated risks, so this is coming again from a bull of coinbase, but i want to show you the pragmatic actual numbers, not just the hype, because right now you go on youtube hype, hype, hype or hate hate nobody's actually, looking at the numbers Giving you a balanced view, which is exactly what i'm gon na do in this video, and i only ask of one thing: don't click? Nothing, don't buy. Nothing! Don't subscribe to. Nothing.

Just give me your attention. We have no sponsorships, no courses. No, nothing just want to give you the information. So, first of all, i guess the most important aspect is the growth in active users.

They grew quarter of a quarter not last year, not the year before q1 to q2 by 40 they're knocking on the 9 million user door, which is not a small feat. It's really impressive, even in this year. This is extraordinary and if you thought that's impressive, hang on you better sit down, so they adjusted. Ebitda went from q2 last year to q2 this year from 61 million dollars to 1.15 billion dollars, so from 60 to over a billion in a single year.

Quarter of a quarter, you can't discount it, you can't ignore it and you can't say it's pure hype. This is obviously a massively growing company and their user base and ebitda numbers are nothing. You can't argue with now hold on a second. I want to show you some good numbers, but i'll also show you the risks.

So it's not all going to be hype. Hang on a second okay. So here's the thing. The one thing you have to notice is kind of the nuanced stuff, not exactly the stuff that you hear in mainstream media and with that we absolutely have to talk about the insane growth in the trading volume, the amount of business being done on the platform, because You have to remember this is a tall booth business, the more cars on the highway, the more money they make so trading volume is extremely important for this company, more than any other company that provides services or goods because essentially they're just collecting tolls so check this Out they had almost 30 billion in transactions in q2.

Last year, q2, this year, almost 500 billion from 30 to 500. Well, almost 500, you can't say that's not impressive, but hang on a second. The one issue i always had with coinbase - and i wanted to see some correction - is the fact that they have a single point of failure or at least had they're extremely concentrated on the price of bitcoin, because most of their transactions were with bitcoin. So obviously, their dependency on the price of bitcoin was always a single point of failure, and now it seems it's actually correcting.

So trading of bitcoin went down from 39 last quarter to 24 of the entire activity. This quarter, which is a massive improvement. It's like client concentration in a regular company, less clan concentration is good, less currency. Compensation is good.

Now ethereum actually went up from 21 to 26, which is kind of a correction i can live with, but the other coins in aggregate all went up from 40 to 50, so essentially, coinbase is decentralizing its activities and eliminating that single point of failure that bitcoin used To be, i don't think it is no more. However, i didn't say this isn't going to be a hype. Video for nothing here are the risks and the things i'm genuinely concerned about with regards to this company, because, as i mentioned, there are no perfect companies, there are no perfect individuals, i mean the only one is my grandpa, probably he's the only perfect guy in his Own eyes, but i mean it's only a company and it has its flaws. So the main things that concern me about this company are three.

First of all, it's the dependency on cryptocurrency prices. This is a tall booth business, so the higher the cryptocurrency go, the more money they make. It's quite simple. So since we're dealing with cryptocurrencies, these are extremely volatile assets.

They go up and down in price like a cso in paradise, i mean that thing is going crazy and their revenue model is entirely dependent on that. That's not something i can live with lightly. That kind of swing 30 up 30 down. It's really crazy! Look! What went on with bitcoin just in the past six months, this isn't healthy for a stable growth of a company.

I really want to see cryptocurrencies prices kind of stabilize before i can say well. Coinbase is definitely a secure blue chip company, because until that happens, there will never be that and there will be a gamble and a growth stock. In fact, unlike other tech companies, their entire business is in complete jeopardy if cryptocurrencies, for whatever reason collapse tomorrow, whether regulatory reasons or whatever reasons or technical reasons or something happens, and people don't want to use cryptocurrencies for any reason, they're screwed, i mean there's no way To explain it they're finished and that's not going to happen with the facebook or within amazon or the google. They have a completely concentrated model on one single type of currency or category of currencies, which is extremely dangerous and basically is kind of getting regulated up.

The wazoo you've seen what happened with china there's a lot of regulatory pressures. I guess this is point number three. I mean governments, don't really like cryptocurrencies in general, that's kind of cats and mailman, it's not a healthy relationship, so you can see a lot of regulatory battles and it's definitely going to impact the company and not in a good way. So, there's definitely a lot of risks when you invest in a company, that's completely dependent on the cryptocurrency business.

You have to understand this isn't a sure bet, there's no sure bets, but this is a very dangerous investment, even though i think personally, it has a lot of upside. But again just my opinion might be inaccurate might be wrong, maybe the ramblings of a madman. You still got ta, do your own research, allegedly blah blah blah and now let's look at the financials. So first of all, let's look at the balance sheet.

That's always a good indicator of the health of a company. So right now on the balance sheet, you can see they have 14.2 billion in total assets, and what i would do kind of intuitively is just eliminate this number, the nine billion that they're holding in customer funds - that's not theirs, that shouldn't be an asset, but you Don't have to do it here because they actually put this number on both sides of the equation it's appearing in assets and it's also appearing in liabilities. So this is a number that actually washes itself out, so you can pretty much ignore that. So, let's look at 14.2.

We can eliminate a little bit of goodwill here. So let's say 13.7. Basically, then we have the other stuff here. So, let's just say, 15 billion dollars in general in actual assets out of which cash are about 4.3, their own cash, not customers, guys so 15 billion in assets about 33 in cash very healthy, especially when there's no debt can't find any debt on the books and Of course, if you look at the liability side, you'll see that there's not a lot there, apart from the customer funds that they have, which is like 9 billion all this other stuff is just wishy-washy stuff, so they have 15 billion in assets and about, let's say 2 billion in liabilities, it's an insane 7x ratio.

You can't find that that's really really high and a good indicator about the financial health of the company. Now we're getting to the main course what the revenues are looking like. So we have two columns here. The first column is the first six months, basically, the combined aggregate of the first six months of 2021 and 2020 separated, and this column is just the last three months just to give you a snapshot.

So when you compare q2 2021 to q2 2020, this is more than 10x. What they actually made look, you have almost let's say: 200 million and it went to 2 billion in a single year. I haven't seen a lot of companies that 10 extra revenues quarter or quarter year over year. That's really impressive, even if you look at the whole thing here, the whole six months from 360 to 3.6.

I mean this is a company, that's 10xing itself. Over the past year, however, i want to cool you down here. That's not as impressive as it looks. You have to understand that this whole thing stops on june 30th, before we had that massive crypto crash, obviously they're, going to feel the pain in the next quarter.

That crypto crash, we had kind of a little recovery but, as i mentioned earlier, they're insanely dependent on the price of cryptocurrencies and when we had the whole crash, you see it in the next financials. That's why you don't see it here, because the cut-off date for this was end of june. So this is not sustainable. The cryptocurrency growth isn't going to be 10x every year.

It's definitely slowing down. People are going back to work less people in the stock market. Definitely less people now in the cryptocurrency market, as the price is no longer in the 50s and the 60s it's in the 30s and the 40s. So it's going to be a slowdown.

It's not going to be 10x! I do still think they're going to have insane growth numbers, but it's not going to be 10x anymore. This is a one-off outlier because of the craziness of 2020 and 2021 and what it did to the cryptocurrency market. This is not sustainable. This is a company that will grow insanely, but not that fast.

However, i do want you to know this, because most of these hype, artists will not tell you that, and i think it's an important, crucial piece of information that you need to have that growth is not sustainable. However, this company is going to outperform as far as growth rates for the going years now. The other thing i want to show you here is look at this total operating expenses operating income. So if you have operating income of 874 million in a quarter right, let's multiply it by four.

So, let's say 900, so it's 3.6 billion per year, so 3.6 billion per year, it's currently trading at almost 60 billion dollars. It has a hefty valuation already, which i think can be justified. I am a huge bull of this company, but you have to understand, if you're getting into this company in this multiple, i mean 3.6 billion all the way to 60 billion. It's a lot of faith.

You have to understand that this has to be your high conviction stock, because otherwise it's going to be very hard to justify these multiples. You have to believe i mean this kind of valuation only makes sense if this is something you absolutely believe in, because again, it's already quite expensive, they're definitely outperforming, but a lot of this future growth is already baked into this price. This 874 reveals that just multiply it by four look at the ratio for the total market cap and you'll see this is not a cheap company, so, as you just saw, coinbase is not only growing year over year, it's also growing quarter of a quarter. It's a trajectory to massive growth, however, however, i'm a huge bull of this company and it's one of my high conviction stocks.

However, i do want to clarify that this kind of growth rate 10xing revenues year over year quarter quarter that ain't going to happen in 2022. Definitely since the prices of bitcoin have come down - and this was actually the case that was making their dependency on the prices of bitcoin are going to screw them for the rest of the year. So q3 q4 is not going to be as impressive unless they can get massive transactional growth and a lot more users to compensate for the loss of bitcoin price. But again it's a lot of ifs still a huge bull of this.

I think this is a 350 to 400 stock. I do think it needs a lot of time to basically bake itself into this price because it's already expensive, if you want to get it now, you have to make a decision that this is a high conviction stock. This is not a good candidate to sit there and wait for an explosion within the next two weeks. I don't think it's going to happen, but if it does hey, why not in any case a huge shout out for the channel members and the patrons you guys, amazing.

If you want access to my file, the spreadsheet, where i have all my target prices, including coinbase. It's available to every single patreon member and channel member. I mean it's five bucks per month and you'll be supporting the channel, but hey it's all gucci. Thank you so much for watching.

I appreciate your time i'll see you tomorrow.