Coinbase Crypto Momentum Stalls, Valuation Stretches: Cut to Sell at Compass Point
Coinbase (COIN) faces a gloomy outlook, according to Compass Point, which downgraded the stock to a “sell” rating and slashed its price target from $330 to $248. This downgrade reflects concerns about weaker-than-expected earnings and diminishing investor enthusiasm for crypto equities. Despite a modest Monday increase to $316 following an 18% post-earnings plunge, the analysts foresee a challenging third quarter due to seasonal weakness and waning retail interest. Increased stablecoin competition further threatens Coinbase and other crypto companies’ valuations by 2025.
Coinbase’s second-quarter results missed expectations, with subscription and services revenue falling 8% short of Wall Street estimates. The third-quarter forecast is similarly disappointing, 5% below consensus. A significant contributor to this shortfall was “Other S&S revenue,” specifically a sharp decline in Coinbase One and other tech-related fees – segments previously viewed as growth drivers.
The crypto market’s recent loss of momentum exacerbates Coinbase’s problems. Bitcoin and Ethereum struggle to gain traction, and retail investors are retreating from “TreasuryCo” stocks – companies holding substantial cryptocurrency assets. Coinbase and MicroStrategy (MSTR) exemplify this trend, with MSTR slowing bitcoin purchases and shifting to preferred equity financing.
Elevated leverage in crypto markets adds to the risk. While July saw a rally fueled by aggressive trading, a rebound in open interest after a dip in liquidations suggests a potential for further sell-offs. Coinbase’s valuation, currently at 44x annualized 3Q25E Street EBITDA, is deemed excessively high by Compass Point, given headwinds from retail trading, ETF and DeFi competition, and the lack of imminent regulatory breakthroughs. The analysts express skepticism about the CLARITY Act’s passage this year, predicting movement in early 2026.
Coinbase’s proposed entry into stock trading is also seen as unlikely to generate significant revenue, given established competitors like Robinhood. Overall, Compass Point anticipates a decline in Coinbase’s premium valuation due to weak crypto performance, intensifying competition, and regulatory uncertainty.
