Compass Point Cuts Coinbase to ‘Sell’ Amid Valuation Concerns and Fading Retail Momentum
Coinbase (COIN) has been downgraded to Sell by investment firm Compass Point, which also slashed its year-end price target to $248 from $330, citing earnings disappointments, valuation risks, and a weakening retail crypto environment.
The downgrade follows an 18% plunge in COIN shares last week, triggered by a softer-than-expected Q2 earnings report. Despite a modest rebound to $316 in early Monday trading, analysts remain cautious on the stock’s near-term outlook.
“We’re still constructive on the broader crypto cycle,” Compass Point wrote in a client note. “But we expect a choppy third quarter with weak seasonality in August and September and fading retail interest across crypto-equity names.”
Analysts flagged several structural headwinds, including intensifying stablecoin competition, which they said could pressure valuations for Coinbase and stablecoin issuer Circle in the second half of 2025.
Coinbase’s Q2 results missed expectations across key metrics. Subscription and services revenue — a metric often viewed as a sign of sustainable growth — fell 8% short of consensus estimates. The midpoint of Coinbase’s Q3 guidance also came in roughly 5% below street forecasts.
The report identified “Other S&S Revenue,” including Coinbase One and tech-related services, as a major contributor to the miss, reflecting underperformance in segments once seen as strategic growth drivers.
Compass Point also expressed concern over broader market sentiment. Despite a rebound in equity markets, major cryptocurrencies like bitcoin and ether remain subdued, and retail interest in crypto-heavy equities such as Coinbase and MicroStrategy appears to be waning.
Leverage in the crypto market adds another layer of risk. According to the firm, July’s rally was fueled by aggressive speculative positioning, and any renewed downside pressure could trigger forced liquidations.
Valuation was a key reason behind the downgrade. Despite recent weakness, COIN stock remains up more than 50% since May and trades at 44 times Compass Point’s annualized Q3 EBITDA estimate — a level the firm views as stretched given current headwinds and limited near-term regulatory clarity.
On that front, analysts were also skeptical about the prospects for the CLARITY Act — a widely anticipated crypto market structure reform bill — noting it’s unlikely to pass before 2026.
As for Coinbase’s rumored push into stock trading, Compass Point questioned its strategic value, particularly given strong incumbents like Robinhood.
“In a softer crypto environment and with limited catalysts ahead, we expect COIN’s valuation premium to compress toward prior ranges,” the note concluded.
