tl;dr
Investment bank Compass Point downgraded Coinbase’s stock from “Neutral” to “Sell,” lowering the price target to $248 from $330 due to increased stablecoin competition and investor fatigue. Coinbase reported a 39% drop in transaction revenue to $764 million and a 6% decline in subscription and servi...
Analysts at investment bank Compass Point downgraded Coinbase’s stock to “Sell” from “Neutral,” citing increased stablecoin competition and growing investor fatigue as challenges for the crypto exchange in the latter half of the year. They lowered the price target for Coinbase shares to $248 from $330, following a weaker-than-expected second-quarter performance marked by a sequential revenue decline in crypto transactions.
Coinbase reported $764 million in transaction revenue, a 39% drop from the previous quarter. The company’s subscription and services segment also fell 6% quarter-over-quarter, earning $656 million. Despite these declines, Coinbase’s stock rose 1% to about $319 on Monday but has dropped 15% from $377 since its earnings report. Year-to-date, the stock has still rallied 28%.
Compass analysts noted that Coinbase’s revenue miss confirmed that its retail trading business faces disruption from decentralized exchanges and exchange-traded funds. They expressed greater concern over the decline in subscription and services revenue due to its recurring fee structure, which investors value highly. The analysts expect current market conditions to persist but warn that Coinbase’s valuation lacks support if the crypto market declines.
The report highlighted growing interest in crypto treasury firms this year but also pointed to compressed premiums relative to underlying crypto holdings, suggesting waning retail interest in crypto treasury stocks. Coinbase benefited from a $1.5 billion gain related to its investment in Circle, a publicly traded stablecoin issuer, boosted by recent legislation favorable to Circle.
Coinbase earned $240 million in stablecoin revenue, but Compass analysts believe mounting stablecoin competition—exemplified by companies like Bank of America waiting on legislation to launch stablecoin products—will pressure valuations for both Coinbase and Circle. They downgraded Circle to “Sell,” lowering its price target to $130 from $205, predicting that new competitors could erode USDC’s market share despite token market cap growth.