Compass Point Research has downgraded Coinbase Global Inc. (NASDAQ: COIN) to sell from neutral, citing concerns over weakening earnings trends and a potentially overextended valuation.
The move follows the crypto exchange’s second-quarter earnings release, which showed a mixed performance that may challenge the stock’s recent rally.
Coinbase shares have surged over 26% year to date, closing at $314.69 on Friday.
However, Compass Point now sees a downside of more than 21%, trimming its price target to $248 per share from $330.
Mixed Q2 results prompt downgrade
Last week, Coinbase reported second-quarter results that beat analyst expectations on earnings per share but fell short on revenue.
Particularly concerning was the company’s transaction-based revenue, a key metric closely watched by investors, which missed StreetAccount consensus estimates.
“COIN’s 2Q/3Q trends affirm weakening earnings despite an ongoing crypto bull market,” Compass Point analyst Ed Engel wrote in a Sunday note.
He added that the firm’s bearish stance is partly driven by the risk of further softness in cryptocurrency prices and a seasonal dip in crypto trading activity.
The report reflects growing skepticism around the sustainability of Coinbase’s performance in a market that, while still buoyant, is showing signs of volatility.
Engel expects a “choppy” third quarter and noted that the typical August and September seasonality could further dampen retail interest in crypto-related equities.
Crypto market headwinds and valuation pressures
While flagship cryptocurrency Bitcoin remains up 22% year to date, trading above $114,000 after peaking at $120,000 earlier this year, Compass Point cautioned that Coinbase’s fortunes are closely tied to broader market sentiment.
The firm warns that if the crypto market undergoes a pullback, Coinbase’s valuation may lack fundamental support.
Engel emphasized that Coinbase currently trades at 44 times forward earnings, nearly double the S&P 500’s multiple of 23, according to FactSet data.
“We see limited support for COIN’s valuation if crypto markets sell off further,” he said.
Additionally, growing competition in the stablecoin space is expected to act as another headwind for Coinbase.
Stablecoins, which are digital assets pegged to traditional fiat currencies such as the US dollar, have become an increasingly competitive segment within the broader cryptocurrency ecosystem.
Outlook: waning momentum despite bullish cycle
Despite acknowledging the broader strength of the current crypto cycle, Compass Point remains cautious on Coinbase’s near-term trajectory.
Engel anticipates that declining retail activity, combined with valuation risks and seasonal headwinds, could stall the momentum that has driven the stock’s strong performance in 2025.
The downgrade represents a notable shift in sentiment, especially as Coinbase has been seen by many investors as a bellwether for the crypto sector.
As the company navigates macro and sector-specific challenges, its ability to maintain growth amid tightening market conditions may face increasing scrutiny.
Coinbase’s next earnings results, as well as the trajectory of Bitcoin and other crypto assets, will likely serve as key indicators of whether this bearish forecast gains traction—or proves overly cautious.
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