Coinbase Global (COIN) stock was double downgraded to a “Sell” rating from “Buy” by H.C. Wainwright’s top analyst, Mike Colonnese. Additionally, the analyst lowered the price target on COIN stock from $305 to $300, implying 19.8% downside potential from current levels. Colonnese attributed the downgrade to Coinbase’s elevated valuation following its nearly 150% rally since April lows, compared to the Nasdaq’s 35% increase.
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Colonnese is a five-star analyst on TipRanks, ranking #90 out of 9,853 analysts. He boasts a 65% success rate and an impressive average return per rating of 47.20%.
Why Did Colonnese Downgrade COIN Stock?
Notably, Colonnese still considers Coinbase as the “Best-of-Breed” crypto exchange and remains bullish on the sector overall. Nonetheless, he believes that Coinbase’s valuation has outpaced its short-term fundamentals and has therefore downgraded the stock.
Partnership with Circle Internet – Importantly, COIN stock received a disproportionate boost from the initial public offering (IPO) of Circle Internet Group (CRCL) on June 5. The two companies jointly introduced the USDC stablecoin, and each partner receives 50% of the reserve income generated from USDC held on other platforms. For reference, USDC is the world’s second-largest stablecoin, with a market capitalization of $62 billion. Furthermore, both CRCL and COIN shares received an additional boost after the U.S. Senate passed the GENIUS Act, a key piece of legislation regulating stablecoins.
COIN Is Trading at a High P/E – Colonnese noted that Coinbase stock is currently trading near its all-time highs, with a P/E (price-to-earnings) multiple of 56x. He also noted that crypto-trading volumes are declining rapidly and are expected to negatively impact Coinbase’s performance.
Expectation of Weak Q2 Revenues – Colonnese added that this is an “opportune time” for investors to book profits from COIN stock ahead of its second quarter earnings on July 31. He expects Coinbase to report disappointing Q2FY25 revenue, which he believes will be followed by a series of downgrades and price target cuts from analysts.
Lowered Q2FY25 Estimates – Based on his view of lower trading volumes and potential for lower revenues, the analyst also lowered his Q2 estimates for Coinbase. For Q2, Colonnese now forecasts revenue of $1.493 billion (prior $1.56 billion), which is below the consensus estimate of $1.67 billion. He also cut his estimates for Q2 adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted EPS (earnings per share) to $516.3 million and $0.72, respectively.
All these factors are expected to negatively impact COIN stock in the coming days. Therefore, Colonnese has a Sell rating on Coinbase Global.
Is COIN a Good Stock to Buy Now?
On TipRanks, COIN stock has a Moderate Buy consensus rating based on 14 Buys and 10 Hold ratings. Also, the average Coinbase Global price target of $301.10 implies 19.5% downside potential from current levels. Year-to-date, COIN stock has surged 50.6%.
