Goldman Sachs Upgrades Coinbase to Buy, Cuts eToro to Neutral

Goldman Sachs has upgraded Coinbase Global Inc. to a Buy rating from Neutral, citing the firm's strategic shift toward stable, long-term growth in the crypto infrastructure space. The move comes as Coinbase's subscription and services segment, which now accounts for about 40% of its revenue, continues to expand. The analyst team set a new price target of $303, representing a 34% potential upside from the recent closing price.

In contrast, Goldman Sachs downgraded eToro Group Ltd. to Neutral from Buy, citing increased competition in its core markets and potential pressure on customer acquisition costs and pricing. The firm lowered its price target to $39 from $48, suggested that eToro's valuation is in line with its European peers despite its weaker growth and margin profile.

The analyst team emphasized that Coinbase's shift from a trading-focused model to infrastructure-driven services is a key factor in its bullish rating. These services include custody, staking, and compliance tools, which generate revenue regardless of crypto price movements.

Why Did This Happen?

Goldman Sachs cited the growing importance of crypto infrastructure as a major trend in the market. Coinbase's infrastructure businesses, such as custody and staking, are seen as less volatile and more stable compared to trading activities. The firm noted that Coinbase's fast-growing subscription and services business has grown from under 5% of total revenue to 40% since 2020.

The upgrade also reflects Coinbase's strong market position, with 9.5 million monthly transacting users and about $500 billion in assets under custody. The firm's growing presence in the U.S. crypto exchange market, where it holds roughly 48% of the market share, is another positive factor.

What Are Analysts Watching Next?

Goldman Sachs highlighted Coinbase's recent product launches as a key growth driver, including new offerings in brokerage, banking, and wealth management. These initiatives are expected to expand Coinbase's exposure to structural growth areas such as tokenization and prediction markets.

On the other hand, the downgrade for eToro came amid concerns about its ability to maintain its growth rate. The firm noted that eToro's customer acquisition costs are approximately 50% higher than its peers, which could affect its profitability. The analyst team also pointed to the company's relatively low pre-tax margins of 36% for 2025 compared to the peer average of 54%.

Goldman Sachs expects continued regulatory progress in the U.S. to support growth in the crypto sector in 2026. The firm is cautiously optimistic about the convergence of traditional brokerage and crypto trading, which could drive increased competition and innovation in the market.

What Does This Mean for Investors?

The upgrade for Coinbase suggests that investors should consider its growing exposure to non-cyclical revenue streams, which are expected to stabilize earnings over time. The firm's infrastructure businesses are seen as having a higher valuation potential compared to its trading-driven peers.

Meanwhile, the downgrade for eToro highlights the risks associated with its business model in a highly competitive market. While the company has a strong social trading platform, the analyst team believes that its growth potential is limited by rising costs and pricing pressures.

Overall, the moves by Goldman Sachs reflect a broader trend in the market toward companies that are building long-term, infrastructure-based solutions for the crypto industry. Investors are likely to focus on Coinbase's ability to execute its product roadmap and expand into new markets in the coming months.