Coinbase Launches Stock Trading to Diversify Beyond Crypto, Challenging Robinhood with 24/5 Zero-Commission Model

What happened

Coinbase announced it is launching traditional stock trading with 24-hour access and zero commissions, a bold move to compete directly with Robinhood and expand into broader financial markets. The DeepValue report highlights Coinbase as a profitable crypto infrastructure leader with a ~50.5x TTM P/E, but its earnings remain heavily tied to crypto volatility and fee compression. This expansion aligns with management's strategy to diversify revenue streams, similar to ongoing shifts toward subscriptions, custody, and derivatives like the Deribit acquisition. However, entering the highly competitive stock trading arena requires significant operational investment and risks diluting focus on core crypto strengths, while the zero-commission model could pressure margins amid established rivals. Investors should view this as a high-stakes bet on execution, with success depending on user adoption and seamless integration into Coinbase's existing platform.

Implication

This move aims to reduce Coinbase's reliance on crypto cyclicality by tapping into the larger stock trading market, potentially boosting user growth and cross-selling opportunities. It aligns with the DeepValue report's emphasis on mix shift toward more stable revenue streams, such as subscriptions and custody. However, competing with entrenched players like Robinhood involves high customer acquisition costs and could strain capital allocation away from core crypto initiatives. Investors must monitor early adoption metrics, impact on core crypto KPIs like MTUs and trading volume, and any regulatory or operational hurdles. If successful, it could support a more bullish thesis; if not, it may distract from profitable crypto segments and add financial drag.

Thesis delta

The announcement introduces a new growth vector that could enhance revenue diversification and reduce exposure to crypto volatility, aligning with the report's focus on mix shift. However, given the high valuation at ~50.5x P/E and significant execution risks in a competitive landscape, the overall HOLD/NEUTRAL stance remains unchanged until tangible results are demonstrated. This adds a critical watch item for stock trading adoption, integration costs, and its effect on core business metrics.