Coinbase (NASDAQ:COIN) stock has been on fire lately, surging 142% over the past 3 months and now trading near all-time highs. The explosive run comes amid Bitcoin’s latest rally to record levels – once again pulling crypto-related stocks along for the ride.
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The key question for investors now is whether it’s the right time for more loading up in order to capitalize on Bitcoin’s continued momentum? No, is the short answer, according to H.C. Wainwright Mike Colonnese, an analyst ranked amongst the top 1% of Wall Street stock experts.
It’s not that Colonnese has concerns about COIN’s fundamentals. Rather, his hesitation comes down to valuation; from his perspective, jumping in at these elevated levels simply doesn’t add up.
“While we continue to view Coinbase as a ‘Best of Breed’ crypto exchange and remain positive on the sector, we believe valuation has outstripped near-term fundamentals following the stock’s ~150% rally since its April lows, which we view as overdone,” the 5-star analyst opined.
The shares’ runup has coincided not only with BTC’s rise but with several positive developments that have taken place. Excitement surrounding Circle’s high-profile IPO on June 5 quickly spilled over to Coinbase, once investors realized the company earns more than half of the reserve income from Circle’s core offering, USDC – the world’s second-largest stablecoin with a market cap of around $63 billion. Coinbase shares got another boost less than two weeks later, on June 17, when the U.S. Senate approved major stablecoin legislation known as the GENIUS Act.
With the stock now sitting at record highs and trading at roughly 56 times FactSet’s 2025 earnings forecast, Colonnese thinks this presents a timely opportunity for investors to lock in gains ahead of the company’s Q2 earnings report on July 31. That is because the analyst thinks that based on current consensus revenue forecasts, it is going to be a disappointing affair.
Colonnese sees “tangible downside” to current consensus estimates for Coinbase’s Q2 transaction and total revenue, which are currently at $900.1 million and $1.667 billion, respectively. Total spot trading volumes on centralized exchanges appear to have dropped significantly in Q2, with CCData reporting just $3.8 trillion in combined volume for April and May – well below the roughly $7.2 trillion recorded in Q1. Moreover, data from The Block (June) and CCData (April and May) indicate that Coinbase’s own spot trading volumes fell 41% quarter-over-quarter to $232 billion, down from $393 billion in Q1.
Reflecting that weakness, the analyst has lowered his Q2 revenue estimate from $1.56 billion to $1.493 billion – well below the Street’s $1.67 billion projection – and cut his adjusted EPS forecast to $0.72, compared to the consensus of $1.50. “We anticipate a slew of downward estimate revisions in the coming weeks,” he warned.
To this end, Colonnese has issued a rare double downgrade, moving his rating from Buy to Sell and trimming his price target from $305 to $300, implying a 25% downside from current levels. (To watch Colonnese’s track record, click here)
Overall, COIN shares hold a Moderate Buy consensus rating from the Street, based on 13 Buys, 11 Holds, and 1 Sell. However, with the average price target of $326.40 implying a 23% drop from here, Colonnese’s cautious outlook appears difficult to dismiss. (See COIN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.