Investment firm Compass Point has issued a “Sell” rating on Coinbase (COIN), citing overvaluation and deepening regulatory and market risks. The move follows a turbulent earnings season and cautious sentiment around crypto equities.
Downgrade Comes with Cut Price Target
Compass Point has slashed Coinbase’s year-end price target from $330 to $248, pointing to disappointing second-quarter results and a sluggish outlook for Q3. Despite trading at $316, COIN is still recovering from an 18% post-earnings drop seen last week.
The firm cited weakening retail activity, declining subscriptions, and increasing competition in the stablecoin and DeFi sectors.
Core Revenue Streams Are Under Pressure
Coinbase’s subscription and services (S&S) revenue fell 8% below Wall Street expectations in Q2, casting doubt on the sustainability of these streams. A sharp drop in Coinbase One memberships and lower tech-fee contributions were among the key reasons for the miss.
The company’s Q3 forecast midpoint is 5% below analyst consensus, further fueling bearish sentiment.
Retail Demand and Regulatory Tailwinds Falter
With Bitcoin and Ethereum trading sideways and crypto markets showing signs of leverage buildup, Compass Point expects choppy trading conditions through Q3 2025, particularly in August and September. Retail interest in crypto stocks is fading, especially among “TreasuryCo” names like Coinbase and MicroStrategy.
The report also casts doubt on significant crypto regulatory reform in 2025, particularly the CLARITY Act, which faces uncertain legislative prospects.
Valuation Stretch Raises Red Flags
Despite its recent gains, COIN is trading at 44x Street estimates for Q3 2025 EBITDA, a level Compass Point sees as unsustainable in light of growing industry headwinds.
“The stock’s valuation appears disconnected from the underlying risks in retail trading, regulation, and competitive threats from ETFs and DeFi,” the firm wrote.
Outlook Remains Cautious for Coinbase
Compass Point’s downgrade underscores broader investor concerns about crypto exchange business models. While the broader crypto cycle shows signs of life, platform earnings and market structure remain volatile, making selective exposure critical for institutional players.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.