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Best Cryptocurrency Stock: Coinbase Global vs. MicroStrategy
Bitcoin(CRYPTO:BTC)’s price has more than doubled in the past 12 months, with the approval of its first spot-price ETFs, the halving of its mining rewards, and the stabilization of interest rates all bringing back Bulls. The easiest way to profit from the Bitcoin rally was to simply buy the cryptocurrency or invest in one of the new ETFs.
However, The Bitcoin Rally also lit a fire under stocks like Coinbase (NASDAQ: COIN), one of the world’s leading cryptocurrency exchanges, and MicroStrategy (NASDAQ: MSTR), an aging enterprise software company that began accumulating Bitcoin in 2020. Over the past 12 months, Coinbase’s stock is up more than 280% and MicroStrategy’s stock is up more than 270%. Let’s see which of these hot crypto stocks is a better buy right now.
Image source: Getty Images.
Coinbase activity finally stabilizes
Coinbase generates most of its revenue through transaction fees, so its growth is closely tied to the broader cryptocurrency market. In 2023, it generated 34% of its trading volume from Bitcoin, 20% from Bitcoin. Ether (CRYPTO: ETH), and 11% of its stable coins. The remaining 35% came from small altcoins and other crypto assets.
Coinbase’s revenue soared 514% in 2021 as stimulus checks, social media buzz, and fear of missing out (FOMO) drove more investors into the cryptocurrency market. However, its revenues fell 59% in 2022 as rising rates burst this speculative bubble.
Its revenue declined another 3% in 2023, as the “crypto winter” cooled its business. But in the fourth quarter of 2023 and the first quarter of 2024, its transaction volume and total revenue increased sequentially again. This stabilization is largely due to the aforementioned tailwinds for Bitcoin and other cryptocurrencies.
Coinbase also continued to grow as several of its largest competitors were derailed by regulatory challenges and became the primary custodian for most of the new Bitcoin spot price ETFs on the market. Analysts expect its revenue to rise 80% for the full year.
Coinbase’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin also returned to positive in 2023 thanks to aggressive cost reduction. Analysts expect its adjusted EBITDA margin to increase from 31% in 2023 to 49% in 2024, as the crypto winter finally ends. Based on these expectations, Coinbase stock still appears reasonably valued, at 19 times this year’s adjusted EBITDA.
MicroStrategy still bets on Bitcoinnot
MicroStrategy’s core software business primarily sells data analysis software for large enterprises. Over the past decade, it has faced intense competition from cloud-based analytics companies like Selling powerdiversified cloud infrastructure platforms like Amazon Web Services (AWS) and Microsoft Azure and small business intelligence companies.
The story continues
MicroStrategy has been gradually expanding its subscription services to offset declining licensing and support revenue. But this process has been slow, and the company unexpectedly shifted gears in August 2020 by purchasing $250 million in Bitcoin. By the end of the first quarter of 2024, it had spent $7.54 billion to purchase 214,400 Bitcoins at an average cost of $35,180 per Bitcoin.
As of this writing, MicroStrategy’s Bitcoin holdings are now worth $13.8 billion, more than half of its $25.3 billion enterprise value.
Bulls believe MicroStrategy’s Bitcoin hoarding strategy will make it a much bigger company, even if growth in its core business stops. Yet analysts still expect the company’s revenue to decline by about 1% this year as it struggles to sell more software.
The company is also taking on more debt to finance its Bitcoin purchases, and analysts expect it to become unprofitable again this year based on generally accepted accounting principles (GAAP) as it accumulates more impairment costs linked to his Bitcoin purchases. Analysts expect its adjusted EBITDA to rise 8% this year, but its stock looks expensive, at 277 times that estimate.
The obvious winner: Coinbase
Coinbase will remain a pillar and bellwether of the growing cryptocurrency market, while MicroStrategy is simply a slow-growing software company betting on Bitcoin. Coinbase is also growing faster and trading at lower valuations than MicroStrategy. Both stocks could continue to rise as the crypto market recovers, but Coinbase is clearly a more promising long-term investment than MicroStrategy at present.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions at Amazon. The Motley Fool holds positions and recommends Amazon, Bitcoin, Coinbase Global, Ethereum, Microsoft, and Salesforce. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Best Cryptocurrency Stock: Coinbase Global vs. MicroStrategy was originally published by The Motley Fool