Water Tower Hour Recap: Bakkt Highlights the Latest in Cryptocurrencies
Founded in 2018, Bakkt builds solutions that enable its clients to grow with the crypto economy. Through institutional-grade custody, trading, and on-ramp capabilities, its clients leverage technology that’s built for sustainable, long-term involvement in crypto. Bakkt Chief Product Officer Dan O’Prey joined us on The Water Tower Hour podcast to discuss Bakkt’s crypto infrastructure business, its history as part of ICE, cryptocurrency differences, its custody focus, and why it is different. The discussion also highlighted Bitcoin ETFs, pending crypto regulation, and some of the biggest misconceptions about crypto. One key point highlighted by O’Prey is Bakkt’s regulatory compliance-first infrastructure. Borne out of NYSE-owner Intercontinental Exchange, Bakkt is secure and fully regulated, creating a significant moat that comes to the forefront when markets are in turmoil. Bakkt is one of less than 20 firms that has a New York Bitcoin license. O’Prey also discussed the biggest misconception in crypto investing: that all crypto companies are tied to the price of Bitcoin. Bakkt provides infrastructure to major financial firms and new style fintech companies alike. While the price of Bitcoin can be an indicator of demand for Bakkt’s software, a better measure is the overall adoption of cryptocurrencies. Once the regulatory environment in the US clears up, Bakkt is likely to see significantly more demand. The discussions around Bitcoin ETFs show cryptocurrencies are making progress in more mainstream markets of the financial world. In our net revenue 3Q23 model, we estimate an $0.18 EPS loss on net revenue of $15.5 million. For the full-year 2023, we estimate net revenue of $63.5 million, up 16% from 2022, with a diluted EPS loss of $0.70. For 2024, we are modeling an EPS loss of $0.56 on net revenue of $88.7 million. Bakkt’s comparables include digital wallet and crypto companies. The comps have a median forward P/S of 4.4x, while Bakkt trades at 4.2x, a 3% discount. You can listen to the episode on Apple Podcasts, Google Podcasts, Spotify, or on our website. You can also find all of WTR’s research on Bakkt on our website. Link in full report.
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