Coinbase Global (COIN) stock has faced a significant shift in analyst outlook, as H.C. Wainwright’s leading analyst, Mike Colonnese, has downgraded the stock from “Buy” to “Sell.” The new price target has also been reduced from $305 to $300, suggesting a potential downside of nearly 20% from current prices. Colonnese’s decision stems from concerns regarding Coinbase’s elevated valuation, especially after the stock’s impressive nearly 150% increase since its lows in April, contrasting sharply with the Nasdaq’s overall rise of 35% during the same period.
Colonnese, a highly regarded five-star analyst on TipRanks with a success rate of 65% and an average return of 47.20% per rating, still regards Coinbase as the premier player in the crypto exchange space. However, he believes the stock’s valuation has exceeded its short-term fundamentals, which prompted his downgrade.
The stock’s rise was notably influenced by its partnership with Circle Internet, following the initial public offering (IPO) of Circle on June 5. Together, both companies manage the USDC stablecoin, which is the world’s second-largest stablecoin with a market capitalization of $62 billion. The recent legislative backing from the U.S. Senate’s passage of the GENIUS Act, aimed at regulating stablecoins, further buoyed both companies’ stock prices.
However, Coinbase is currently trading at a high price-to-earnings (P/E) ratio of 56x. Colonnese pointed out that a sharp decline in crypto trading volumes is anticipated to adversely affect Coinbase’s financial outcomes. He expressed cautious expectations for the second quarter of FY25, predicting disappointing revenue results, which he estimates at $1.493 billion—lower than both the previous estimate of $1.56 billion and below the consensus of $1.67 billion. His revised forecasts for adjusted EBITDA and earnings per share have also been lowered to $516.3 million and $0.72, respectively.
Despite the bearish outlook, it’s noteworthy that the consensus rating on TipRanks for COIN stock remains a “Moderate Buy,” supported by 14 Buy and 10 Hold ratings. The average price target of $301.10 still indicates a downside of roughly 19.5%, although COIN stock has shown a solid year-to-date gain of over 50.6%.
Investors are cautioned to consider Colonnese’s insights as they navigate potential market fluctuations and the crypto landscape moving forward. While this period appears challenging for Coinbase, the overall crypto sector remains a dynamic investment environment with potential for recovery and growth in the long term.