Coinbase, the first stock in the crypto circle, went public in April 2021, dropping from an opening price of $381 to $310 on the first day.

It then fell for over a year to a low of $31, leaving investors in despair.

But this round of cyclical performance and stock prices have started to rise, reaching a peak of $349 by the end of 2024. Today, let's talk about whether Coinbase's stock is worth buying.

1/ Stock Evaluation Framework

Before evaluating Coinbase, we need to understand the framework for assessing a stock—Warren Buffett's value investing system.

Buffett's value investing emphasizes holding quality company stocks for the long term at a reasonable price to achieve compound growth. Specifically, it requires analysis from three dimensions: business model, moat, and management team.

Business Model

A quality business model needs to have a good industry track and strong profitability. The industry track determines the company's growth space, while profitability reflects its efficiency in converting market opportunities into actual earnings.

For example, the smartphone industry where Apple operates is a high-demand, fast-iterating track. Over the past three years, Apple's annual revenue has stabilized at around $390 billion, with net profits of about $95 billion to $100 billion and a profit margin of up to 25%, far exceeding the average level of traditional manufacturing. Similarly, Tencent's WeChat, as a 'must-have' social product, achieved revenue of 645.3 billion yuan and a net profit of 190 billion yuan in 2024, with a profit margin of about 30%, showcasing strong profitability.

Moat

A moat refers to the unique advantages that a company maintains to stay ahead in competition, allowing it to resist rivals and maintain market position. Moats can come from scale (such as network effects), brand loyalty, or technological barriers.

Apple has built a deep moat through brand loyalty ('Apple fan' culture) and a robust ecosystem. Buffett once proposed a thought experiment: Would you be willing to permanently give up using an iPhone for $10,000? Most people would likely decline, reflecting the high loyalty to the Apple brand. Tencent's WeChat has achieved 'winner takes all' status through strong network effects, making it difficult to recreate another WeChat regardless of the resources invested.

Management Team

An honest and capable management team is key to a company's long-term success. An excellent team can not only formulate strategies but also stabilize development amid market fluctuations.

Apple's Steve Jobs and Tim Cook, Tencent's Pony Ma and Zhang Xiaolong have all demonstrated outstanding business and management capabilities. Moreover, their restraint and focus are rare qualities in large enterprise management teams.

2/ Evaluating Coinbase Stock

With the investment framework in place, evaluating Coinbase becomes straightforward.

Business Model

The cryptocurrency industry is a high-growth track, and exchanges represent the top business model in this sector.

Coinbase achieved revenue of $6.6 billion in 2024, a year-on-year increase of 111%, with trading revenues of $4 billion (up 162%), and a net profit of $2.6 billion, boasting a remarkable profit margin of 40%. This high profit margin benefits from industry dividends and reflects the company's competitiveness.

Moat

Coinbase's moat is primarily reflected in its brand and scale advantages. As the first publicly listed cryptocurrency exchange, Coinbase is recognized by governments and law enforcement in over 60 countries, establishing a high level of trust. Its trading volume of $1.2 trillion in 2024 showcases its strong market position.

Management Team

Coinbase's management team may not have the fame of Jobs and Zhang Xiaolong, making them harder to understand. However, established in 2012 and having experienced four cycles of ups and downs while navigating multiple regulatory challenges, the company has consistently ranked among the industry leaders, demonstrating the team's overall capabilities.

Additionally, during the downturn from 2022 to 2023, Coinbase launched the Ethereum L2 public chain Base outside of exchanges, achieving a rebound in both business and stock prices. The current total value locked (TVL) in the Base chain is about $4 billion, ranking first among L2s. Daily active users stand at 2.78 million, second only to Solana among all public chains.

Furthermore, Coinbase recognized the importance of compliance early on, decisively choosing to go public and forgoing token issuance, demonstrating the management team's long-term strategic vision.

One success may be luck, but repeated successes are strength.

3/ Investment Potential

From the perspectives of business model, moat, and management team, Coinbase is a decent target, and its long-term investment value rivals that of most tokens (excluding Bitcoin!).

Coinbase's current stock price (as of June 2025) is $261, with a market capitalization of $66.6 billion, and a static price-to-earnings ratio of 25.6 times, which is not expensive.

Of course, it also has risks: First, the volatility of the cryptocurrency industry leads to unstable performance; the massive losses in 2022 are a prime example. Second, competitive pressure persists, and the entry of traditional financial institutions may erode its market share. Finally, from the moat perspective, its product and service network effects are not strong, making it difficult to achieve a monopoly like WeChat.

Based on the principles of value investing, long-term dollar-cost averaging or buying at more reasonable valuations during bear market lows should be a better choice.