Coinbase (COIN) stock is slightly up at the time of writing, even after analysts at Compass Point downgraded the stock from Hold to Sell. Indeed, the firm warned that its current valuation may not be sustainable and lowered its price target from $330 to $248, which implies a possible 21% drop from Friday’s closing price. The downgrade comes shortly after shares of the crypto exchange plunged 14% on Friday, its biggest single-day drop since April, following weaker-than-expected earnings due to lower trading volumes.
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Compass Point analyst Ed Engel explained that, although he remains positive about the broader crypto market, the upcoming quarter could be challenging. Seasonal weakness in August and September, combined with slowing retail demand for crypto-related stocks, could weigh on Coinbase’s performance. Interestingly, a key factor was Coinbase’s Subscription and Services revenue, which totaled $655.8 million last quarter, was well below Wall Street’s $715.2 million forecast. Because investors place a higher value on recurring revenue streams, this shortfall had a bigger effect on the stock’s valuation.
The firm also highlighted the growing competition among stablecoins, as they could pressure Coinbase’s partnership with Circle (CRCL) and reduce the income the company earns from interest on digital tokens. Engel also pointed to the declining interest in crypto treasury stocks like Strategy (MSTR), which has recently slowed its Bitcoin purchases. Still, not all analysts are pessimistic. Bernstein, for example, led by five-star analyst Gautam Chhugani, remains bullish and describes Coinbase as the “one-stop Amazon of crypto services.” In addition, despite recent volatility, Coinbase shares remain up about 28% so far this year.
Is COIN a Good Buy Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on COIN stock based on 15 Buys, 11 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average COIN price target of $389.71 per share implies 22.6% upside potential.
