Summary Coinbase shares have surged 130% in the past year due to rising crypto popularity and Donald Trump being back in the Oval Office. The company has turned things around with four straight quarters of GAAP profitability, aided by reduced operating expenses. Higher crypto prices and increasing USDC market cap boost Coinbase's revenue, making it a stronger candidate for S&P 500 inclusion. Over the last year, one of the biggest winners in the market has been Coinbase ( COIN ). The cryptocurrency platform has seen its shares surge about 130% thanks to a significant increase in crypto popularity, sending Bitcoin and other crypto prices surging. With former President Trump winning back his spot in the White House in November, investors have been betting that the crypto craze has only just begun. This year, Coinbase is looking at another potential major catalyst, that is being added to the S&P 500 index. Previous coverage on the name: It has been a while since I covered the stock, with my last article on the name coming back in the summer of 2023 . At that time, my thesis was like many others, that is that a bet on Coinbase was a bet on the cryptocurrency space. If you believe that Bitcoin and others would surge in value over time, a major trading platform like Coinbase is a good place to be. I also pointed out that should we get approval for Bitcoin ETFs, Coinbase would likely be a benefactor. At that time, Coinbase shares traded for about $94 a share, and Bitcoin was around $26,000. As of Tuesday's close, Coinbase shares went for about $294, but Bitcoin now fetches you about $106,000. Coinbase did great in the week after last November's US elections, but since November 13th is only up about 4% while Bitcoin is up about 16%. A whole new ballgame: When I last looked at Coinbase, the company was struggling a bit. Revenues were declining at significant rates over prior year periods, and the company had racked up six straight quarters of GAAP losses. There would be one more smaller loss reported in Q3 2023, but since then, as you can see below, we have seen four straight quarters of GAAP profitability. The company's latest shareholder letter for Q3 2024 can be read here . Coinbase Key Results (Q3 2024 Shareholder Letter) The company has worked tremendously to become more efficient, lowering its headcount quite substantially. The reduction in operating expenses has been a key reason why the bottom line has turned around, and analysts are currently expecting a decent profit when the company reports Q4 results. Being able to demonstrate continuous profitability is a key item that helps you get added to the S&P 500 index. While I'm not calling for Bitcoin to soar to $1 million or more very soon like some other folks out there, it does seem like there are reasons to be optimistic. You have companies like MicroStrategy ( MSTR ) buying $1 billion or more a week at this point , further reducing the available supply out there. Investors are also piling money into Bitcoin ETFs, sending prices higher over time. If President Trump decides to create a Strategic Bitcoin reserve , bulls will be quite happy moving forward. Looking at the current picture: One of the things that has made Coinbase's revenue so volatile is the reliance on transaction volumes. When Bitcoin and other coin volume has been light, the company's revenues take a hit. With volatility being much higher in the last couple of quarters, revenues are no longer in the sub $1 billion per quarter area. In fact, current street estimates show they should be well above that moving forward. Higher crypto prices help with blockchain rewards revenue, a key part of the subscription and services segment. However, the company has also seen nice growth in its stablecoin revenue, nearly $247 million in Q3 2024 as compared to $172 million a year earlier. The company generates revenue here partly from its partnership with Circle regarding USDC, and it noted in its Q3 letter that the market cap of $36 billion for USDC was its highest since early 2023. As the market cap of USDC rises, USDC invests its reserves mostly in US treasuries, generating a good deal of interest. By the end of November, Circle reported nearly $40 billion in USDC reserves , about 10% higher than what Coinbase referenced in its latest letter. Circle's latest weekly data on January 16th had the number at around $46 billion, but in recent days the market cap has grown about a billion dollars per day, approaching $51 billion on Monday. Every billion dollar increase means another roughly $40 million in annual interest on Circle reserves, of which Coinbase takes a slice of (exact number has not been disclosed), further helping its stablecoin revenue base. With a market cap of about $75 billion currently, Coinbase is one of the largest US companies not in the S&P 500 index. Now that recurring profitability seems to have been established, the name could be up for index inclusion. Based on the holdings data for the SPDR S&P 500 ETF Trust ( SPY ), that ETF alone would need to purchase about a billion dollars of Coinbase alone should it be added. With a lot of other money indexed to the S&P 500, index inclusion should spark a decent rally. While short interest in Coinbase is less than 4% of shares outstanding currently , S&P inclusion would likely chase some of those bears away as well. The valuation could be worthwhile: When I last looked at Coinbase shares, the average price target on the street was $77 a share. That implied about 20% downside from current levels, so analysts were mostly in the bear camp. As of Tuesday, the average target was about $290, just a couple of dollars below where the stock finished the trading day, and the street has been playing catch-up to the rally at times. A solid Q4 report and optimism over 2025 could easily send that average over $300 in the coming months. What gets me, though is that the street's average was around $237 going into the November election. Since then, Bitcoin prices are up more than 50%, USDC market cap is up over 40%, and crypto trading volumes have certainly jumped. Since then, analysts have only raised their average target by about 22%, which seems a little light. Coinbase currently trades for about 12 times this year's expected revenue, about a 10% discount to new age trading platform Robinhood ( HOOD ), although Robinhood is expected to see a higher revenue growth rate in percentage terms this year. Final thoughts and recommendation: While Coinbase shares have rallied nicely in the past year, there is still potential for the stock to go even higher. Bitcoin prices have seen new highs recently, and investors believe that now in office, President Trump will be favorable to this industry. USDC's market cap continues to rise by the day now, which will help Coinbase's stablecoin revenue base. I think Coinbase is good for a speculative buy currently, as the potential for S&P 500 inclusion has definitely increased in recent quarters. With the company's management making necessary moves to reduce operating expenses, GAAP profits look like they are here to stay. Inclusion in the key market index would result in several billion dollars of Coinbase stock being bought, which could add to even more gains should crypto prices continue to head higher.