Compass Point Downgrades Coinbase to ‘Sell’ as Crypto Momentum Slows and Valuation Stretches
Compass Point has downgraded Coinbase (NASDAQ: COIN) to a Sell rating and lowered its year-end price target from $330 to $248, citing disappointing second-quarter results, slowing crypto activity, and concerns about overvaluation.
COIN shares were trading slightly higher on Monday around $316, after falling nearly 18% last week following weaker-than-expected Q2 earnings.
“While we remain constructive on the broader crypto cycle, we foresee a volatile third quarter driven by seasonal weakness and waning retail appetite for crypto-treasury equities,” Compass Point analysts wrote.
Key Drivers Behind the Downgrade:
- Disappointing Q2 Performance: Coinbase missed consensus estimates on subscription and services revenue, falling 8% short in Q2. Guidance for Q3 also came in below Street expectations, with the midpoint of projections trailing by 5%.
- Segment Weakness: The decline was led by slower growth in “Other S&S revenue,” including Coinbase One and tech-driven service fees — areas previously viewed as promising long-term growth engines.
- Fading Retail Participation: Interest in crypto-treasury stocks like Coinbase and MicroStrategy has declined. With Bitcoin and Ethereum showing little momentum, retail traders have pulled back, limiting upside potential.
Competitive and Regulatory Pressures:
Compass Point also flagged rising competition in the stablecoin and crypto infrastructure space as a headwind. The firm believes Coinbase and Circle (CRCL) could face valuation compression in the second half of 2025 as new entrants challenge their market share.
On the regulatory front, hopes for meaningful legislative progress this year have diminished. Analysts expressed skepticism that the CLARITY Act, a key proposal aimed at modernizing crypto regulation, will pass in 2025 — pushing expectations into early 2026.
“We’re doubtful of meaningful regulatory breakthroughs this year, particularly around crypto market structure,” the report stated.
Valuation Concerns:
Despite its Q2 miss, Coinbase shares rallied 56% between May and July, raising concerns about stretched valuation. The firm currently trades at 44x annualized Q3 2025 Street EBITDA estimates, which Compass Point views as excessive given current risks and muted performance.
The firm also questioned the company’s planned move into stock trading, citing tough competition from established platforms like Robinhood. Analysts noted this new line of business is unlikely to contribute meaningfully to near-term earnings.
“Under current market conditions, we expect COIN’s premium multiple to contract and revert closer to historical ranges,” Compass Point concluded.
