Compass Point Turns Bearish on Coinbase, Flags Fading Momentum and Stretched Valuation -

Compass Point Downgrades Coinbase to ‘Sell’ on Fading Retail Demand, Elevated Valuation

Compass Point has lowered its rating on Coinbase (COIN) to Sell, cutting the year-end price target to $248 from $330, citing underwhelming Q2 results, declining retail participation in crypto equities, and valuation concerns amid regulatory uncertainty.

The downgrade follows a sharp 18% drop in Coinbase shares last week, though the stock edged 1.3% higher to $316 in early Monday trading.

“We remain optimistic on the broader crypto cycle, but anticipate a volatile third quarter marked by seasonality-driven softness and fading interest in crypto-treasury stocks,” analysts wrote.

Key Risks Highlighted:

Weak Q2 performance: Subscription and services revenue — a key income stream — missed expectations by 8%, with early Q3 trends offering little optimism.
Earnings pressure: The midpoint of Coinbase’s Q3 forecast came in 5% below Wall Street estimates.
Slowing segments: “Other S&S revenue,” which includes Coinbase One and tech-related services, showed a significant quarter-over-quarter decline — areas investors had expected to drive growth.

Market and Valuation Concerns:

Compass Point flagged weakening retail demand across crypto-linked stocks and noted that the broader crypto market — despite recent equity strength — has lost momentum. Bitcoin and Ethereum remain under pressure, while crypto-exposed names like Coinbase and MicroStrategy have seen outflows as speculative interest wanes.

The analysts also warned that high leverage in the crypto derivatives market poses a downside risk. July’s rally was fueled by aggressive positioning, and a deeper sell-off could trigger another wave of forced liquidations.

From a valuation perspective, Compass Point noted that COIN is still trading at 44x annualized Q3 EBITDA, a premium it sees as unsustainable given the competitive landscape and macro headwinds.

Regulatory Doubts:

Expectations around the CLARITY Act, a bill designed to overhaul U.S. crypto market structure, are also fading. Compass Point expressed skepticism about its passage this year, projecting more meaningful progress in early 2026.

Meanwhile, Coinbase’s reported plans to enter stock trading — a move seen as a diversification strategy — are being met with analyst doubt. With competitors like Robinhood already deeply entrenched, the firm sees limited near-term upside.