We rely on a scenario discounting approach that we dub as a “Slide-Ruler” DCF. Our $505 target price assumes a number of variables including: 
• Mid-teens five-year revenue CAGR based on: (i) mid-to-high single-digit transaction market share (low-teens market volume compounded growth,~50% lower spreads, and constant asset prices) and (ii) low double-digit share of assets on platform with conservative ~45bps Subscriptions-n-Services revenue yield (assuming increasing staking, custody, stablecoin, and interest income expansion).
• EBITDA margin expansion capped in the mid 50s (near peak levels in FY'21) and expectations the company maintains a capital-light business model (EBITDA-to-FCF conversion of 75%).
• Terminal growth below the World Bank’s Global GDP forecast of 2.7% in 2025-26 (we use 2.0%) and a weighted cost of capital of 14.0% (vs. calculated WACC of ~10%-11%).
• Note #1: Adjustments in our target price may reflect only a baseline mark-to-market update versus current crypto prices, while maintaining our existing valuation framework assumptions for percentage growth and profitability. As a reminder, our valuation framework maintains the assumption of constant crypto prices marked near recent market levels. 
• Note #2: Our target price does not factor pending M&A.

We rate COIN High Risk based on Citi’s quantitative model, which screens the stock as High Risk given high exposure to volatile crypto prices. We note the following downside risks to the shares achieving or exceeding our target price:
• Digital Asset Reform will take time and could present a mix of outcomes for Coinbase: Motivation for digital asset reform has improved markedly versus the previous administration. That being said, there are a number of legislative hurdles/debates likely to emerge in the coming quarters. These shifts are likely to be positive for the industry, though invite increasing competition for Coinbase from both crypto-native and traditional financial services companies. Additionally, crypto reform could materially alter unit economics, business lines, and/or result in higher operating costs for Coinbase over the long term.  
• Significant Exposure to Crypto Volatility: Both the stock and Coinbase’s financial results will likely incur a high degree of volatility.
• Earnings Volatility: We anticipate our estimates for Coinbase’s revenue, profitability, cash flows, and target price will change more often than for other companies in our coverage universe. It is also likely that our valuation framework will change over time as well.
• Spread Compression Looks Inevitable: As in other asset categories, we expect cryptocurrency transaction fees to compress over time due to competitive pressures.
If any of these risk factors has a greater upside/downside impact than we anticipate, the share price may not achieve our price target.