New Constructs CEO Doesn't Believe in Coinbase Valuation
The CEO of New Constructs is convinced that Coinbase's estimated 100 bln valuation is not constructive and should be cut by 81%.
Recently, the exchange Coinbase reported 800 million in profit and 1.8 billion in revenues. These figures allowed a preliminary estimate of the exchange at 100 billion, but not everyone agrees with them. One of the opponents of this opinion was analyst David Trainer. In his report, he said that Coinbase should be valued at 18.9 billion, but not a hundred.
For the analysis, David Trainer used the DCF method. This technique allows you to estimate the value of investments, taking as a basis the cash flows potentially received by the depositor. The approach has often been criticised for misleading investors by relying too much on the future. However, financial experts point out that it is useful “when used correctly”. Trainer's firm has previously applied a similar method to the future price of Netflix shares.
David Trainer claims that Coinbase charged 0.57% from each financial transaction on the site, which brought it about 1.1 billion in total. While its total trading volume exceeded 193 billion. This same amount was equal to 86% of revenue last year.
If the assertion that the crypto market is “just developing” is true, then the competitive position of America's largest cryptocurrency exchange is under threat and is likely to deteriorate. Exchanges such as Kraken, Binance and Gemini will simply offer investors better commissions, biting off a significant chunk of the market from Coinbase.
According to Trainer, in order to reach the same 100 billion, the American crypto exchange must retain profit by 25% even after tax deductions and consistently add 50% to its total income annually for seven years. Thus, by 2027, Coinbase's revenue is required to break the 21 billion mark and be one and a half times higher than the total income of NASDAQ and ICE last year.