Coinbase Downgraded to Sell by Compass Point Amid "Choppy" Q3 Crypto Outlook

Compass Point Research & Trading downgraded Coinbase Global (NASDAQ:COIN) stock to Sell from Neutral, citing a "choppy" environment for crypto starting in Q3. Analyst Ed Engel believes this will impact Coinbase's performance.

Compass Point Research & Trading has downgraded Coinbase Global (NASDAQ:COIN) to a Sell rating from Neutral, citing a "choppy" environment for crypto expected to start in the third quarter of 2025. The downgrade comes after the crypto exchange delivered Q2 earnings and revenue that fell short of expectations, as trading volume retreated markedly.

The downgrade was led by analyst Ed Engel, who noted that Coinbase's Q2/3Q trends affirm weakening earnings despite an ongoing crypto bull market. Engel expects a "choppy" third quarter alongside weak August/September seasonality and waning retail interest in crypto treasury stocks. The midpoint of Coinbase's guidance range for subscription and services revenue trailed the Street consensus by a wide margin [2].

Compass Point cited waning retail interest, weaker-than-expected Q2 results, and soft 3Q guidance as key factors behind the downgrade. Subscription and services revenue missed Street expectations by 8% in Q2, with 3Q guidance coming in 5% below consensus. The firm also expects increasing stablecoin competition to weigh on Coinbase's valuations in the second half of 2025 [1].

The downgrade comes as Coinbase reported $1.5 billion in Q2 revenue and unveiled a series of bold moves, including a new partnership with Samsung Pay, the launch of perpetual futures, and a 10x speed upgrade for its Base blockchain. However, these developments may not be enough to offset the challenges posed by a weakening crypto environment and increasing competition from stablecoins and decentralized finance platforms [4].

Coinbase currently trades at 44x annualized 3Q EBITDA forecasts, a level that Compass Point sees as hard to justify if crypto markets continue to decline. The firm's revised $248 target is based on a 25x multiple of its optimistic 2026 EBITDA estimate. Compass Point warned of risks from elevated crypto leverage, a potentially delayed CLARITY Act, and Coinbase's lag in launching stock trading compared to peers like Robinhood (NASDAQ:HOOD) and Kraken [1].

While Compass Point remains constructive on the current crypto cycle, the firm expects a choppy third quarter for Coinbase, which may impact its performance and valuation. Investors should closely monitor Coinbase's earnings and guidance for any signs of improvement in the challenging crypto environment.

References:
[1] https://finance.yahoo.com/news/compass-point-downgrades-coinbase-valuation-132531265.html
[2] https://seekingalpha.com/news/4477257-coinbase-downgraded-as-compass-point-sees-choppy-q3-for-crypto
[3] https://www.investing.com/news/stock-market-news/compass-point-downgrades-coinbase-on-valuation-weak-earnings-outlook-4167890
[4] https://www.cryptoninjas.net/news/coinbase-unveils-bold-crypto-push-1-5b-revenue-samsung-pay-deal-and-700k-waitlist/