Coinbase ( COIN -7.37% ) has a number of competitive advantages, including first-mover status as a cryptocurrency exchange and huge profit margins.
In this segment of “The 5” on Motley Fool Live, recorded on Nov. 23, Fool contributors Taylor Carmichael and Jason Hall discuss why Coinbase is one of Taylor’s favorite stocks, and why it has the potential to be a ten-bagger from here.
Jason Hall: Taylor, this is one, I like this. I’m beginning to like the company more and more but I still have a tough time wrapping my head around the big valuation.
Taylor Carmichael: Coinbase. It’s interesting. I’ve had a couple of picks and shovels plays in the crypto space. Silvergate Capital ( SI -13.00% ) is a bank that banks a lot of them. I’ve been playing this game that’s on the blockchain. Both of these have the valuations, my profits really have skyrocketed. I started buying crypto a week or two ago. I dipped my toe in and I mainly went to Coinbase. Coinbase for those who don’t know, it’s the brokerage for the crypto industry. You can get like Bitcoin ( BTC -2.44% ) and Ether ( ETH -3.46% ). You can get those on Square ( SQ -7.98% ). We can’t get Ether there, just Bitcoin but they’re on Square, on Robinhood ( HOOD -7.52% ), on PayPal ( PYPL -3.39% ). They have like two or three coins. Coinbase has 120 coins. It’s the biggest of the altcoins. If you’re really interested at all in crypto, Coinbase is really the place to start. I think it’s got a great kind of consumer. It’s just a powerful brand. They’re very friendly for newbies. They’re teaching, they spend a lot of money and effort teaching people about crypto, which is really important, I think. This is a brand new thing. I bought a basket of crypto and I’m not spending a lot of money here, it’s all under one percent but I bought a few $100 here or $50 here. I just bought a basket, and crypto is getting a commission on every purchase.
Carmichael: Coinbase, yes. At the end of it, I was like man, Coinbase got a lot of money for me, and the next day, I bought shares at Coinbase. Coinbase has some of the most amazing financials of any company. They’ve got 50 percent profit margins. They’ve quadrupled their revenues. Let me see, six billion in revenues and they’re quadrupling it. That’s just phenomenal. Of course, it all depends on how you come down on crypto. If you think crypto is a legitimate opportunity, I’ve come to the conclusion that this is going to be the future of technology, the blockchain, and a bet on crypto is really a bet on the blockchain. The more I look into it, the more I think this is like the internet 2.0. When the blockchain comes, it’s going to destabilize a lot of my existing stocks. I’m dipping my toes into the crypto waters and Coinbase is another picks and shovel play. It’s a stock, but they have a really strong brand, they have a really strong business. I think if the other brokerages, like Schwab ( SCHW -1.04% ) is allegedly going to start trading crypto, I don’t think they’re going to offer 120 coins. I think they’re going to just start with one or two because there’s a whole learning curve that you have to do. Coinbase has been doing this for over a decade. They have a huge head start and they are just a powerful name. I would suggest, Fools, take a look at it, particularly if you own some Bitcoin or if you’re looking at crypto, I would definitely research Coinbase as a stock. Whether it can get 10 times. It’s a very large-cap. It’s a $78 billion company. I think it’s possible. Typically though, it’s easier if you’re under 10 billion to do that 10 bagger. Smaller companies have it better, but I think Airbnb can do it and they are a very large company. Depending on how big crypto is, yes, I think they can do it, given 10 years maybe.
Jason Hall: We’ll see. It’s an interesting company, hugely profitable, no doubt about that.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.