Betting on Bitcoin: Does Coinbase Stock’s Surge Signal a Buy?

Stocks to buy

Bitcoin (BTC-USD) hit a record high of $69,202, topping its previous high of $68,999.99 in November 2021. That’s good news for Coinbase Global (NASDAQ:COIN) and COIN stock. 

After all, Bitcoin accounted for 34% of its 2023 trading volume and 35% of its transaction revenue. 

“We generate a large portion of our total revenue from transaction fees on our platform in connection with the purchase, sale, and trading of crypto assets by our customers. Transaction revenue is based on transaction fees that are either a flat fee or a percentage of the value of each transaction,” states pg. 22 of its 2023 10-K

In 2023, Coinbase’s transaction revenue was $1.52 billion, accounting for 48.9% of its total revenue. So, Bitcoin accounted for $532 million of the company’s transaction revenue, down from $1.71 billion in 2021. As Bitcoin goes, so goes Coinbase. 

The company’s 2023 shareholder letter boasted that the company earned $964 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), up from -$371 million in 2022. 

While that’s all very nice, many other U.S. companies earned this much in the past year, many of them involved in industries not nearly as speculative or volatile. 

Is COIN stock the best bet With $1 Billion EBITDA? Maybe. Maybe not. Let’s have a look.  

15 Possible Stocks to Choose From

Using S&P Global Market Intelligence’s screening tool, I’ve compiled a list of 15 companies in the S&P Composite 1500 that had between $900 million and $1 billion in EBITDA in the latest 12 months. 

To make the cut for further consideration, these companies should have an EBITDA margin at or near Coinbase, which is 30.8% based on $964 million and $3.1 billion in revenue.

Of the 18, only one has a higher EBITDA margin at 45.7%, with four others in the 20s, including one at 27.7%, within 310 basis points of Coinbase. 

Company Revenue EBITDA Margin
Lamar Advertising (NASDAQ:LAMR) $2.11B 45.7%
Idex Corp. (NYSE:IEX) $3.27B 27.7%
Charles River Laboratories (NYSE:CRL) $4.13B 23.5%
Deckers Outdoor (NYSE:DECK) $4.12B 22.9%
Coherent Corp. (NYSE:COHR) $4.63B 21.4%

One of my favorite stocks is Deckers Outdoor, the makers of Ugg boots and Hoka running shoes. It continues to grow like weeds. Its net sales in Q3 2024 were 16% higher to $1.56 billion, with Hoka sales up 21.9% to $429.3 million. Its net income in the quarter was 40% higher over Q3 2023.  

DECK stock is up 36% in 2024. It will join the S&P 500 later in March. It’s a winner. 

The other option besides Lamar Advertising is Idex, an Illinois-based company that makes industrial machinery and products for many end markets. Its three operating segments are Fluid & Metering Technologies (FMT), Health & Science Technologies, and Fire & Safety/Diversified Products (FSDP).    

In 2023, Idex had a record revenue of $3.3 billion with a record free cash flow of $627 million, 28% higher than in 2022. According to the company, its adjusted EBITDA was $899.6 million in 2023, $6.9 million less than the S&P Global Market Intelligence number, but a margin of just two basis points less at 27.5%. It’s still terrific.

IDEX stock hasn’t done much in the past year. The low single-digit sales growth likely had something to do with it. Despite this, I could see myself making this a long-term buy. 

The Better Buy?

Lamar Advertising has an EBITDA margin of nearly 15 percentage points higher than Coinbase, with not almost the same amount of volatility or risk. 

In the past, I’ve written occasionally about Outfront Media (NYSE:OUT), one of the largest operators of outdoor billboards and transit displays in the U.S. and Canada. Lamar is a direct competitor. 

In Jan. 2021, I suggested it might be a good stock to buy under $20. At the time, it was around $18. I thought it had been battered enough by the pandemic. It’s down another 17% since, nearly half its $28 IPO price from 2014.

Lamar’s chart doesn’t look much better. It’s up 51% over the past five years, 81% higher than OUT, but still trailing the index. 

In 2023, its adjusted EBITDA increased by 5.1% to $985.7 million, while its sales increased by 3.9% to $2.11 billion. However, its total debt of $3.34 billion is 28% of its market cap. That leaves little room for error.

With projected 2024 adjusted funds from operations of $7.75 a share at the midpoint of its guidance, it trades at 15.0x this estimate. That’s not cheap. 

In conclusion, COIN stock is a good bet on the growth of cryptocurrency and blockchain if you’re an aggressive investor. If you’re not, Deckers is the way to go.  

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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