Coinbase Cut to Sell at Compass Point as Crypto Tailwinds Fade and Valuation Appears Overextended

Coinbase Downgraded to Sell by Compass Point Amid Earnings Miss, Rising Competition

Compass Point has downgraded Coinbase (COIN) to Sell and lowered its year-end price target to $248 from $330, citing deteriorating fundamentals, increasing market competition, and valuation concerns despite broader optimism around the current crypto cycle.

COIN shares were up 1.3% at $316 in early Monday trading, following a steep 18% drop last week after the exchange reported weaker-than-expected second-quarter results.

“While we remain constructive on the overall crypto environment, we anticipate a volatile third quarter, with weak seasonality and declining retail interest weighing on crypto-exposed equities,” analysts wrote in a note. They also pointed to intensifying competition in the stablecoin market, which could pressure valuations for both Coinbase and Circle (CRCL) in the second half of 2025.

The firm noted that Coinbase’s Q2 performance came in below expectations, particularly in subscription and services (S&S) revenue, which fell 8% short of Wall Street estimates. The company’s Q3 guidance midpoint also landed 5% under consensus. A sharp drop in Coinbase One and other S&S categories contributed heavily to the shortfall.

Compass Point also flagged early third-quarter trends as underwhelming and warned of fading momentum in retail-focused “TreasuryCo” stocks—companies with significant crypto holdings—including Coinbase and MicroStrategy (MSTR). MSTR, notably, has slowed its BTC accumulation and shifted to alternative capital-raising strategies.

The report emphasized growing risk from high leverage in crypto markets. July’s rally, driven by aggressive trading activity, could quickly unravel, triggering forced liquidations if prices correct.

Valuation remains a concern. Despite recent weakness, COIN shares have surged 56% from May to July. Analysts at Compass Point say the stock is still trading at 44x projected annualized Q3 EBITDA—an elevated multiple they believe is unsustainable given current headwinds.

Regulatory reform prospects remain uncertain. The firm expressed skepticism about the passage of the much-anticipated CLARITY Act in 2025, predicting material developments only in early 2026.

Additionally, Compass Point is unconvinced that Coinbase’s rumored foray into stock trading will offer meaningful upside, citing stiff competition from entrenched players like Robinhood.

“With weakening performance, rising risks, and an overextended valuation, we believe Coinbase shares could revert to more normalized levels in the months ahead,” the report concluded.