With cryptocurrencies, including Bitcoin and Ethereum, hovering close to record highs, the stocks of companies that participate in this highly disruptive space have also gained momentum in recent trading sessions. Bakkt Holdings (BKKT) went public via a SPAC merger on October 28 at $10 per share and is currently trading at $34.95. In comparison, the shares of Coinbase (COIN), which is one of the largest crypto-trading platforms in the world, have gained close to 50% in price in the last month.
Digital tokens continue to generate market-thumping gains, with cryptos such as SHIBA Inu and Solano rising by over 10,000% over the last year. And in the event market sentiment among crypto investors remains bullish, it is likely that Bakkt and Coinbase will continue outrunning the indexes in the near term.
So, let’s examine what has driven the price rally in the stocks of both these companies, which are operating in the crypto space and which we think should both be part of one’s growth portfolio right now.
The bull case for Bakkt Holdings
Bakkt Holdings in Atlanta, Ga., operates a digital asset platform where digital assets can be bought and sold. The company was established by The Intercontinental Exchange (ICE), which owns multiple stock exchanges, including the NYSE. The Bakkt digital wallet enables merchants and individuals to execute crypto transactions and derives revenue from levying a transaction fee for each payment as well as for converting crypto into a fiat currency.
According to its prospectus, Bakkt aims to end 2021 with nine million users, and estimates the number will climb to 25 million by 2025. Its management team believes Bakkt is on track to report $889 million in sales this year, which is impressive given that the company is valued at a market cap of just $1.78 billion currently.
However, like other growth stocks, Bakkt remains unprofitable, and the company has forecast a $169 million EBITDA loss this year. In contrast, by 2025 Bakkt expects to generate revenue of $6.6 billion and EBITDA of $285 million as it continues to onboard payment providers and expand internationally.
The bull case for Coinbase
As one of the fastest-growing tech companies, San Francisco’s Coinbase, has increased the number of users on its platform from 1.5 million in June 2020 to 8.8 million in June 2021. Its revenue has increased from $178 million to $2.03 billion over this period. This has allowed the company to end Q2 of 2021 with a $1.6 billion net profit.
After establishing itself as a market leader as a cryptocurrency broker, Coinbase now aims to expand its offerings and diversify its revenue base. The company plans to launch an NFT or non-fungible token service soon. It also recently disclosed its partnership with social-media heavyweight Meta Platforms (FB), formerly known as Facebook. The company said it will provide Meta with custodial services for the latter’s digital wallet Novi.
Coinbase went public in April 2021. Its shares thereafter lost more than 30% in value over the next five months, before rebounding in price since the start of October.
The two companies are expected to grow at an enviable pace going forward. But I believe Bakkt Holdings is poised to deliver outsized gains going forward versus Coinbase, given its wide portfolio of products and solutions, reasonable valuations, and improving profit margins.
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BKKT shares were trading at $33.36 per share on Thursday afternoon, down $1.71 (-4.88%). Year-to-date, BKKT has gained 230.95%, versus a 25.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...
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