Morgan Stanley downgraded Coinbase to underweight from equalweight on Monday and cut its price target to $120 from $258, a 53% reduction, CoinDesk reports. Analyst Michael Cyprys said the exchange's earnings recovery looks weaker than expected.
"Confidence in the earnings recovery has deteriorated," Cyprys wrote in a note. He cited weak crypto trading activity, a softer revenue outlook, and uncertainty in crypto markets following the recent Binance hack.
COIN fell 2.3% to $140.25 in early trading, adding to a 10% decline last week.
What got cut
The bank didn't trim. It cut its 2027 revenue forecast by 28% and its adjusted EBITDA estimate by 47%. For 2028, the revenue and adjusted EBITDA estimates came down 18% and 25%.
Morgan Stanley now expects Coinbase to generate $2.4 billion in normalized EBITDA by 2028, about 14% below 2025 levels. That is despite the exchange's push into new businesses.
The more telling move is the multiple. The bank cut the valuation it applies to Coinbase's EBITDA to 12 times from 20 times. Lower estimates say the next few years look rough. A lower multiple says the business itself deserves a cheaper rating than it used to get. The second one is the bigger statement.
The quarter behind it
The downgrade follows Coinbase's third-quarter report last Thursday. Revenue came in at $1.22 billion, down 35% from a year earlier and roughly flat from the prior quarter. Transaction revenue fell 44% year over year to $590 million. Subscription and services revenue declined 20% to $570 million.
The pattern here should worry Coinbase holders. Crypto prices have rebounded at points this year, but trading activity stayed subdued. Coinbase makes its money when people trade, not when they hold. The subscription and services segment was supposed to smooth out that dependence, and it shrank 20% anyway. The hedge isn't hedging.
I keep coming back to the size of the target cut. Analysts trim price targets all the time. A 53% cut in a single note is something else. It reads as an admission that the previous model was wrong, not just stale. The gap between $258 and $120 is the gap between what the Street thought this business was and what the numbers say it is.
Whether $120 turns out to be the floor or just the next stop, nobody knows. But when the bank covering you decides your earnings deserve a 12x multiple instead of 20x, the argument is no longer about one bad quarter.