Compass Point Downgrades Coinbase to Sell Ahead of Earnings Report

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Analysts at Compass Point Issue Downgrade for Coinbase

Compass Point analysts have reassigned a Sell rating to shares of Coinbase (NASDAQ:COIN), expressing apprehension in anticipation of the company’s first-quarter earnings report, scheduled for May 8.

Disappointing Performance in Q1 and Q2

The downgrade underscores the analysts’ cautious perspective, attributing it to an anticipated lackluster performance in both Q1 and Q2. A noteworthy decline in retail trading activity has been observed, compounded by a transition towards lower-margin corporate transactions.

Decline in Trading Volumes

The firm pointed out, “Coinbase’s Q1 trading volumes fell by 12% quarter-over-quarter,” a decline that stands out against the broader industry, where volumes decreased by 18%. Although Coinbase’s market share saw a marginal increase of 50 basis points, this was primarily driven by institutional trades concentrating on Bitcoin (BTC), while retail trades remained predominantly focused on altcoins.

Concerns Over Q2 Trends

Analysts have also flagged concerns over “disappointing Q2 year-to-date trends,” noting a significant fall in retail transactions since January. This downturn could potentially lead to results that fall short of expectations.

Revenue Predictions and Market Expectations

Analysts are forecasting “2Q trading revenue to reach $863 million, diverging from market expectations of $1.141 billion,” implying a potential shortfall of 24%.

Long-term Growth and Competitive Challenges

Compass Point has expressed apprehensions regarding Coinbase’s long-term growth prospects, highlighting that decentralized exchanges (DEXs) are progressively capturing market share from Coinbase’s higher-margin retail sectors. “DEXs on platforms like Solana and Base are drawing an increasing number of mass retail users.” This trend could pose a significant challenge to Coinbase’s competitive edge.

Amidst a “lower-margin mix shift” and rising competition, Compass Point has adjusted its 2025 forecasts, setting a new target price of $180 for Coinbase stock, suggesting a potential decrease of 14%.