Coinbase Stock: Worth Buying Despite Shrinking Revenue

Coinbase Global (COIN) stock has seen an 18% gain over the past month, but its price is still down about 44% from a year ago. At $175 per share, the market values Coinbase at 7.3 times sales, which is more than double the S&P 500's multiple of 3.2 for revenue.

The question remains whether what Coinbase is building is worth more than its shrinking revenue. The company's crypto trading volumes have been down, and its revenue fell by 18.5% year over year in Q2 to $1.2 billion.

However, the trailing twelve months brought in $6.3 billion against $7.0 billion a year earlier, with an average annual growth rate of 37.6%. In contrast, the S&P 500's revenue has grown at a rate of 5.9% over the same period.

Coinbase is diversifying its business by adding new services such as prediction markets and perpetual futures, which have existing competitors. The company's CFO says that sharing economics with partners on stablecoin USDC is a long-term play, but it also means that growth in this area comes at the cost of sharing revenue.

Coinbase still generates operating cash flow, turning 27.3% of its revenue into cash over the trailing twelve months, compared to 21.8% for the market. However, the company's net loss was $1.0 billion over the same period.