Coinbase (COIN):

Coinbase is a $50bn mkt cap exchange, with a typically advantaged 'exchange' business model, that just happens to service the worlds most volatile asset class.

A large proportion of the market believes:

• Crypto excitement is nothing more than an expression of easy money policy

• Crypto is full of fraud, money laundering and has limited value.

• 2021 is an exceptional year: COIN EPS ests shot to $12. I.e. it is trading at 19x PE, what is an assumedly peak number. Estimating a normalised number is very challenging.

The market is not wrong on any of the above, but because of these short-term factors investors may be missing the long-term opportunity. We think blockchain and crypto will change the world, making COIN an attractive long term bet:

• Our upside scenario has 2022 EBITDA of $3.5b (+50% vs. consensus)

• A critical bet in owning Coinbase is that Crypo goes mainstream, hence a lot of our time was spent on the drivers of this. We think it is in the process of happening as evidenced by growing institutional interest in the asset class.

• Regulation: again, necessary to go mainstream. U.S. is an outlier in terms of lack of clarity.

• Another longer term bet is that Coinbase becomes a SuperApp, given the advantages it has we believe this is possible. Crypto is the first truly borderless global financial product.

• Coinbase has an advantaged customer acquisition model - Estimate an LTV to CAC of >10x, currently closer to 20x, and the ability to cross sell many financial products.

Potential Upside: $364(+49%)

Sensible Downside: $219(-11%)

Link to Research