Hook / Thesis (short)
Coinbase is no longer just a crypto exchange. Management's deliberate expansion into adjacent, higher-frequency products - most notably stock/equity trading - combined with the company's regulatory-first positioning and institutional custody scale, justifies upgrading COIN to a Buy around current levels. At ~15x EBITDA, the stock prices in a reasonable multi-year growth scenario tied to monetization of retail and institutional flows and improved operating leverage.
Why this is actionable now: the share price (last trade ~ $241.08 on 01/11/2026) implies a market capitalization roughly in the low-$70 billion range (using diluted shares from recent filings). That valuation is sensitive to EBITDA assumptions; if Coinbase can turn product expansion into an incremental few billion dollars of EBITDA over the next 12-24 months, the stock has meaningful upside. This is a tactical buy with an explicit entry zone, stop, and two targets below.
What Coinbase does and why the market should care
Founded in 2012, Coinbase is the leading U.S. cryptocurrency exchange platform and a regulated gateway for retail and institutional participation in crypto. Historically, transaction fees on crypto trades have driven most of the revenue stream. Over the last two years Coinbase has invested aggressively in adjacent capabilities - custody for institutions, prime brokerage, and data services - to convert episodic crypto volume into recurring B2C and B2B revenue.
The next logical adjaceny is equities: enabling customers to trade U.S. stocks (and potentially derivatives) on a 24/7 basis through crypto-native rails. That product has higher gross-margin potential than low-margin brokerage services because Coinbase can leverage its custody, liquidity pools, and cross-sell into margin/prime services for institutional customers. In short: equities can be incremental revenue with attractive economics that drop to EBITDA quickly.
Key recent financials (what the filings show)
- Q3 2025 revenue was $1.869 billion and operating income was $480.5 million (reported 10/30/2025).
- Quarterly net income in Q3 2025 was $432.6 million with diluted EPS of $1.50 on diluted shares of 291,958,000.
- Using diluted shares from the most recent quarterly filing and the last trade price (~$241.08), implied market cap is roughly $70.4 billion (241.08 x ~291.958M shares).
- Long-term debt on the Q3 2025 balance sheet is $7.20 billion; equity attributable to parent is $16.02 billion.
- Operating income over the most recent three reported quarters (Q1 2025, Q2 2025, Q3 2025) sums to ~ $1.162 billion (Q1: $705.8M; Q2: -$24.65M; Q3: $480.5M). Including an adjacent quarter (Q3 2024 operating income $169.5M) produces a four-quarter operating-income sum around $1.33 billion - a conservative stand-in for operating profitability today.
Bottom line: Coinbase is profitable on an operating basis in the most recent periods, but current operating-profit run-rate is well below the implied EBITDA required to justify a 15x multiple on enterprise value - which sets up the investment case: expansion and margin improvement must generate the incremental EBITDA that the market will price in.
Valuation framing and why 15x EBITDA
Using the ~ $70.4B market cap estimate plus net debt (long-term debt ~ $7.2B; conservatively adding debt to market cap yields an approximate enterprise value of ~ $77.6B), a 15x EV/EBITDA valuation implies an EBITDA run-rate of about $5.17 billion (77.6 / 15).
Current operating-income TTM proxy is ~ $1.3 billion, implying Coinbase needs to produce roughly $3.8-$4.0 billion of incremental EBITDA to reach the 15x threshold at current EV. That is a meaningful gap, but plausible under our base view if Coinbase can:
- Meaningfully monetize equity trading and derivatives for retail and institutional clients, capturing both transaction fees and margin/prime revenue.
- Lever its existing custody, settlement, and liquidity infrastructure to roll out low-cost market access and advanced margin products that carry higher take rates.
- Improve operating leverage by stabilizing R&D and other operating expenses as revenue scale increases.
We acknowledge this is an aggressive operating uplift, not an automatic outcome. The 15x multiple is therefore an execution-dependent target, not a baseline endorsement of current numbers.
Catalysts (2-5)
- Product launches and regulatory approvals for stock-trading products - any public rollout or approval announcement should re-rate the stock as addressable revenue expands.
- Institutional custody wins and prime brokerage contracts that translate into sticky, fee-based revenue (quarterly filings have shown growth in custody/prime initiatives).
- Sequential margin improvement in operating results driven by higher protocol fees and cross-sell into margin and lending products (watch operating-income and R&D cadence in quarterly results).
- Positive macro tailwind in crypto markets or renewed retail engagement; historical revenue swings have tracked volumes, so a sustained up-cycle would accelerate the story.
Trade idea — actionable plan
We rate COIN: Buy (Upgrade).
Entry zone: $235 - $245 (scale in; initial position 50% of target allocation at $241)
Stop-loss: $190 (protects against regulatory or product-execution shock; ~20% below entry)
Target 1 (12 months): $340 (≈ +40% from current; reflects partial multiple expansion as equity trading begins to meaningfully contribute)
Target 2 (24 months): $480 (≈ +100% from current; reflects full realization of ~15x EBITDA thesis assuming material equity trading and margin lift)
Position sizing: size to risk tolerance; consider pyramiding on product-release milestones or accelerating revenue evidence
Why these levels?
$340 represents a market-implied EV assuming some re-rating and ~ $1.5-2.5B of incremental EBITDA vs today. $480 equates to a value where the market fully prices in the 15x-EBITDA runway described earlier and a higher multiple for faster growth. Stops are set to protect capital from the binary risks here - regulation and competitive product launches.
Risks and counterarguments
At least four clear risks could derail this trade:
- Regulatory risk. Coinbase operates in a highly regulated space. Any adverse regulatory action, new capital requirements, or restrictions on trading/listing could materially compress margins and user activity.
- Competition and product-risk. Established retail brokers and crypto-native competitors are pursuing similar 24/7 equity/derivatives products (see recent industry moves). Faster, deeper competitors could undercut pricing or capture the most valuable customer cohorts.
- Execution and integration risk. Building a profitable equities business requires regulatory approvals, operational controls, and risk management. Execution delays or higher-than-expected compliance costs would push out the EBITDA ramp.
- Macro / volume risk. Trading volumes (crypto and equities) are cyclical. Lower volatility and lower retail/institutional engagement could suppress revenue and the time it takes to hit EBITDA targets.
- Balance-sheet and financing risk. The company carries meaningful long-term debt ($7.2B). If operating cash flows do not accelerate, financing costs or refinancing needs could constrain investments or prompt dilution.
Counterargument: One could argue Coinbase is already fairly priced or even expensive because its core crypto-transaction model remains volume-dependent and volatile. The equity-trading expansion is not guaranteed; incumbents like Robinhood and derivatives-native venues may capture most of the marginal equity flow. If product adoption is slower or take-rates are lower than we model, the market may re-rate COIN lower, not higher.
What would change my mind?
I would improve my conviction and push a higher price target if we see the following in quarterly results and disclosure:
- Clear, quantified rollout metrics for equity trading (user adoption, daily active traders, AUM, and take-rates) that show rapid uptake within the first 2-3 quarters of launch.
- Evidence of material institutional prime/custody contracts that produce recurring fee revenue and materially higher gross margins relative to spot transaction fees.
- Operating leverage in SG&A or R&D (i.e., revenue growth outpacing fixed operating expenses) that lifts operating income meaningfully toward the multi-billion dollar EBITDA band implied by a 15x multiple.
Conversely, regulatory action, persistent low volumes, or a need for substantial additional capital to support equities trading would lower my conviction and likely move the rating back to Neutral or Underweight.
Conclusion
Coinbase is an execution and regulation story more than a pure-volume play today. The company has demonstrated it can generate positive operating income in recent quarters, it has a deep balance sheet and institutional relationships, and management is clearly investing to extend the platform into higher-margin adjacencies. That combination - if executed - supports a 15x EBITDA valuation over the next 12-24 months. We upgrade to Buy and recommend a disciplined entry in the $235-$245 zone, a stop at $190, and targets at $340 and $480 tied to progressive realization of the equity-trading opportunity and margin leverage.
Trade smart: size for volatility, monitor regulatory headlines closely, and use product-rollout milestones as incrementals to add conviction.
Note: Financial figures referenced are from Coinbase's most recent quarterly filings (accepted 10/30/2025) and market snapshot as of 01/11/2026.