Why Bakkt Holdings Stock Is a Solid Long-Term Bet?

The cryptocurrency market continues to remain attractive to investors as this alternative asset class has increased wealth at an exponential rate over the past few years. One publicly listed company that is well poised to benefit from the widespread adoption of cryptocurrencies in the upcoming decade is Bakkt Holdings (NYSE: BKKT).

Valued at a market cap of $1.68 billion, Bakkt Holdings estimates its total addressable market at $1.6 trillion that includes cryptocurrencies, rewards and loyalty points, gift cards, and gaming assets. Its regulated platform allows customers to aggregate digital assets, as well as trade and transfer them easily.

Further, enterprises can leverage the Bakkt platform to expand payment offerings, create new revenue streams and increase customer loyalty.

Bakkt Holdings went public via a SPAC merger

Shares of Bakkt Holdings began trading on the NYSE last month at a price of $10 per share on the back of a special purpose acquisition company or SPAC merger. Its currently trading at a price of $34 per share, gaining over 200% in less than a month.

The company derives revenue by charging a 2% commission on each payment on its platform as well as earning a 2% spread on cryptocurrency purchases for converting the digital assets to fiat currencies.

Bakkt estimates to onboard nine million users on its platform by the end of 2021 and 31 million users by 2025. This will allow the company to generate $889 million in sales this year, a majority of which will be produced from cryptocurrency trades.

Further, Bakkt Holdings has forecast sales to touch $6.6 billion by 2025, allowing the company to improve its bottom-line from an adjusted EBITDA loss of $169 million this year to a profit of $285 million at the end of the forecast period.

Major partnerships announced by Bakkt

Recently, Bakkt announced a strategic relationship with Fiserv (NASDAQ: FISV) which is a payments and financial services company. Bakkt aims to leverage Fiserv’s capabilities to allow users to transfer funds in and out of mobile wallets. Further, the integration of Bakkt with Fiserv’s Carat omnichannel ecosystem will enable enterprises to pursue options for B2B and B2C payouts, loyalty programs, and related transactions.

Bakkt also disclosed a partnership with payment processing giant Mastercard (NYSE: MA) to make it easier for merchants, banks, and other companies to access the digital asset ecosystem.

Its press release states, “Bakkt extends Mastercard’s ecosystem of cryptocurrency partners enabling Crypto-as-a-Service, which provides quick access to cryptocurrency capabilities. Through the power of the Mastercard network and Bakkt’s trusted digital asset platform, Mastercard partners will be able to offer cryptocurrency solutions. These include the ability for consumers to buy, sell and hold digital assets through custodial wallets powered by the Bakkt platform and streamlined issuance of branded crypto debit and credit cards.”

Mastercard will also integrate cryptocurrencies in its loyalty solutions allowing partners to offer them as rewards and create fungibility between loyalty points and the digital assets. So, users can earn and spend cryptocurrency instead of loyalty points and also convert crypto holdings to pay for purchases.

What next for investors?

In case Bakkt manages to report sales of close to $900 million in 2021, the stock will be valued at a price to sales multiple of less than 1.5x, making it one of the most undervalued companies in the cryptocurrency universe.

Bakkt is a good stock to have in your portfolio given its expanding suite of solutions, big-ticket partnerships, widening user base, attractive valuation and improving profit margins.

MasterCard (NYSE:MA)
Historical Stock Chart
From Mar 2024 to Apr 2024