So, here’s the deal with Coinbase, things aren’t looking too hot right now, at least according to Compass Point. They just downgraded Coinbase stock from a “Hold” to a “Sell,” which basically means they’re telling people, “Yeah, might be a good time to cash out.” And they didn’t stop there. They also slashed their year-end price target from $330 to $248. Ouch.
Why the downgrade?
A few reasons, actually. First off, there’s been a noticeable drop in retail investor excitement. You know, the everyday people who were once hyped about crypto? A lot of them seem to be stepping back. Plus, Coinbase’s subscription-based income (the stuff that’s supposed to bring in steady cash) came in lower than expected, and competition is heating up big-time, especially in the stablecoin and DeFi space.
Even though Coinbase shares were up a bit on Monday (around $316), that followed an 18% nosedive after last week’s earnings report. So, it’s not exactly smooth sailing.
Compass Point is still somewhat positive about the overall crypto market, but they’re bracing for a rocky third quarter. August and September are typically slower months anyway, and with fewer retail traders jumping in, it’s not looking super promising. On top of that, stablecoin competition is starting to bite, which could bring down Coinbase’s and Circle’s (CRCL) valuations even further later this year.
Here’s the kicker: Coinbase’s Q2 earnings weren’t great. Their subscription and services revenue came in 8% below Wall Street’s predictions, and the Q3 forecast isn’t much better, about 5% below what analysts had hoped. One of the main problem areas? Revenue from Coinbase One (their premium membership) and other tech services fell off a cliff. These were supposed to be their big growth engines, so that’s not ideal.
Meanwhile, the broader crypto market has been kinda dragging its feet. Bitcoin and Ethereum are stuck in neutral, and those “TreasuryCo” stocks, basically companies like Coinbase and MicroStrategy that hold a lot of crypto, are feeling the pressure. MSTR, for example, is slowing down its Bitcoin purchases and is now trying to raise funds in other ways. Not the most bullish sign.
Another thing Compass Point brought up is leverage. July’s rally was driven by traders going heavy on leverage (basically borrowing money to make bigger bets), but if things turn south again, we could see more forced selling, which just makes the drop worse.
Now, here’s the part that really raised eyebrows: Coinbase stock is still trading at what analysts say is a “stretched” valuation. It’s priced at 44 times the expected earnings for Q3, which is kind of insane given all the headwinds, weak retail interest, ETF and DeFi competition, and no real progress on crypto regulations.
Speaking of regulations, there was hope around this thing called the CLARITY Act, which is supposed to make crypto rules more transparent. But Compass Point is doubtful it’s going to pass this year. Maybe 2026, if we’re lucky.
Oh, and Coinbase recently floated the idea of letting users trade regular stocks on the platform. But let’s be honestRobinhood already dominates that space, and analysts aren’t too convinced this move will actually bring in much money.
Bottom line
Compass Point thinks Coinbase is overvalued given everything going on. They’re expecting the stock price to cool off and settle somewhere more reasonable. So yeah, if you’ve got money in Coinbase or were thinking about jumping in, it might be a good time to pause and take a closer look at what’s happening behind the scenes.
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