Launch Of Passkeys And Focus On Self-Custody Will Drive User Adoption In Growing Crypto Market

Key Takeaways

• Strong revenue growth, driven by exchange aggregation and strategic partnerships, enhances future prospects and may improve net margins.
  
• Focus on self-custody solutions and financial flexibility positions Exodus to capitalize on regulatory trends and market expansion in digital asset management.
  
• Reliance on cryptocurrency market dynamics and regulatory changes poses risks to consistent revenue growth and profitability for Exodus Movement.

Catalysts

Operates as a financial technology for blockchain and digital asset industry in the United States.

• The strong growth in revenues, especially driven by exchange aggregation, is a positive sign for future revenue prospects, as this model continues to capitalize on the increasing user activity spurred by the expanding crypto market.
  
• Expansion of strategic partnerships, such as those with Ledger and Magic Eden, is expected to enhance revenue streams and potentially improve net margins by leveraging shared resources and networks.
  
• The launch of new products like Passkeys, which simplify the integration of digital wallets into applications, can drive user adoption and increase revenues by attracting more developers and users to Exodus' platform.
  
• The focus on self-custody offerings, aligning with increasing regulatory clarity and crypto adoption, may strengthen Exodus' market position and positively impact future earnings by tapping into the growing demand for secure, user-controlled digital asset management.
  
• The company's healthy corporate treasury and its position with significant digital asset holdings provide the financial flexibility to invest in growth initiatives and navigate market volatility, potentially leading to better long-term profitability.

Exodus Movement Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Exodus Movement's revenue will grow by 27.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 62.7% today to 70.7% in 3 years time.
• Analysts expect earnings to reach $132.3 million (and earnings per share of $3.54) by about February 2028, up from $56.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.3x on those 2028 earnings, down from 23.9x today. This future PE is lower than the current PE for the US Software industry at 38.2x.
• Analysts expect the number of shares outstanding to grow by 1.93% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.37%, as per the Simply Wall St company report.

Exodus Movement Future Earnings Per Share Growth

Risks

• The company's revenue is heavily dependent on fees from third-party API providers, making it vulnerable to market cycles and volatility in the cryptocurrency market, which could impact revenue consistency and predictability.
  
• The short-term volatility of the cryptocurrency market presents a risk, as a significant portion of Exodus Movement's business is tied to cryptocurrency price fluctuations and user activity, potentially affecting both revenue and net margins.
  
• The company's reliance on digital asset holdings and the adoption of new mark-to-market accounting could result in fluctuations in operating and net income due to potential swings in digital asset values, adversely impacting earnings.
  
• Potential changes in regulatory policies, particularly in the cryptocurrency sector, could introduce uncertainties and operational challenges, potentially affecting revenue generation and overall profitability.
  
• The company has experienced sequential declines in quarterly revenue due to seasonal market activity and cryptocurrency market volatility, indicating potential challenges in maintaining consistent revenue growth.

Valuation

• The analysts have a consensus price target of $60.0 for Exodus Movement based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $70.0, and the most bearish reporting a price target of just $50.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $187.1 million, earnings will come to $132.3 million, and it would be trading on a PE ratio of 16.3x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of $47.81, the analyst price target of $60.0 is 20.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.