1Q24 Saw Strong Client Crypto Trading as the Company Manages Expenses Down
President and CEO Andy Main focused on Bakkt’s three key priorities for 2024 as the company saw strong 1Q24 crypto trading activity with notional traded volume up 324% sequentially. The company is cutting costs, and it expects to have between $42 million and $57 million in cash at the end of 2024. Objectives for 2024 include broadening client networks, expanding products, and expense management. The company guided to opex of $155-165 million, which would be down significantly from $195 million in 2023, and an improvement over the $160-170 million guidance given in March 2024. The key new product is its own Electronic Communication Network (ECN) named “BakktX”, purposebuilt for institutional investors. The company sees a significant opportunity as the SEC’s approval of Bitcoin ETFs has stimulated mainstream adoption of crypto. Bakkt looks to leverage its expertise in regulated markets to build an industrial strength ECN. In our net revenue 2Q24 model, we estimate a $1.76 EPS loss on net revenue of $16.0 million. For the full-year 2024, we estimate net revenue of $72.3 million, up 24% from 2023, with a diluted EPS loss of $6.46. For 2025, we are modeling an EPS loss of $5.41 on net revenue of $83.7 million. Note that the recent 1-for-25 reverse stock split should be considered when comparing with previous EPS. Bakkt is trading at a significantly lower P/S than comps. Bakkt’s comparables include digital wallet and crypto companies. The comps have a median forward P/S of 5.3x, while Bakkt trades at 2.1x, a 60% discount. Founded in 2018, Bakkt builds solutions that enable its clients to grow with the crypto economy through a regulated approach in the US and internationally. Through institutional-grade custody, trading, and on-ramp capabilities, its clients leverage products and solutions built for sustainable, long-term involvement in crypto. Regulatory compliance-first infrastructure is a differentiated strength of Bakkt. 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 have a New York Bitcoin license. We will be hosting a fireside chat with President and CEO Andy Main and CFO Karen Alexander on Monday, May 20, 2024, at 11:00 am ET. Link to register in our full report. All of WTR’s research on Bakkt is available on our website. Link available in our full report.
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