Coinbase Crypto Momentum Stalls, Valuation Stretches: Cut to Sell at Compass Point

Coinbase (COIN) has been downgraded to a sell rating by Compass Point, which also cut its year-end price target from $330 to $248, citing weaker-than-expected earnings and fading interest in crypto equities as key risks. COIN is trading modestly higher on Monday at $316 following last week's earnings-related 18% plunge. “While we remain constructive on the current crypto cycle, we expect a choppy 3Q alongside weak August/September seasonality and waning retail interest in crypto treasury stocks,” analysts wrote. “We also expect increasing stablecoin competition to weigh on both COIN and CRCL's valuations in 2H25.” Coinbase missed expectations for second-quarter results, and early third-quarter trends aren’t looking much better. Subscription and services revenue, a metric investors see as a reliable income stream, came in 8% below Wall Street estimates in Q2. The midpoint of the company’s Q3 forecast is also 5% below consensus. “‘Other S&S revenue’ was a key contributor to COIN's 2Q/3Q miss,” Compass Point wrote, pointing to a sharp quarter-over-quarter decline in Coinbase One and other tech-related fees — segments many investors had hoped would drive long-term growth. Compass Point’s downgrade comes as the crypto market loses momentum despite broader stock markets recovering after last week’s dip. Bitcoin (BTC) and ethereum (ETH) have struggled to gain ground, and retail investors appear to be pulling back from “TreasuryCo” stocks — companies holding large amounts of BTC or other cryptos on their balance sheets. This includes Coinbase and Strategy (MSTR), the latter of which recently slowed its bitcoin buying pace and shifted toward raising funds through preferred equity rather than stock offerings. The analysts flagged that elevated leverage in crypto markets poses a further risk. July’s rally was fueled by aggressive trading, but with open interest rebounding after a short dip in liquidations, a deeper sell-off could trigger another round of forced selling. Valuation is also a concern. Despite the weak Q2 results, COIN shares rallied 56% from May to July. Compass Point warns that “COIN is still trading at 44x annualized 3Q25E Street EBITDA forecast,” which it believes is too high given headwinds in retail trading, competition from ETFs and DeFi, and limited near-term regulatory breakthroughs. Compass Point was also doubtful the CLARITY Act — a bill seen as key to regulatory reform — would pass this year. “We’re more skeptical towards a market structure bill passing this year,” the firm said, projecting movement in early 2026 instead. Coinbase has floated the idea of offering stock trading to users, but analysts are unconvinced it will be a meaningful revenue stream, especially with competitors like Robinhood already far ahead. “Under a backdrop of weak crypto performance, we see COIN's premium valuation compressing back towards its prior range,” the report concluded.