coindesk.com
Morgan Stanley downgraded Coinbase COIN$141.45 to underweight from equalweight, warning that a slowdown in crypto trading and weaker revenue prospects could weigh on the exchange's earnings for years.
“Confidence in the earnings recovery has deteriorated,” Morgan Stanley analyst Michael Cyprys wrote in a note on Monday. Alongside the downgrade, Cyprys slashed his price target to $120 from $258, citing weaker trading activity, a softer revenue outlook and uncertainty in crypto markets following the recent Binance hack.
COIN is lower by 2.3% in early trading to $140.25, adding to last week’s 10% decline.
The downgrade comes amid a difficult year for crypto markets, with sharp price swings and bouts of selling weighing on investor sentiment. Even when prices have recovered, trading activity has remained subdued, putting pressure on exchanges like Coinbase that rely on transaction fees for much of their revenue.
The bank cut its 2027 revenue forecast by 28% and adjusted EBITDA estimate by 47%. For 2028, it lowered revenue and adjusted EBITDA estimates by 18% and 25%, respectively.
Morgan Stanley now expects Coinbase to generate $2.4 billion in normalized EBITDA by 2028, about 14% below 2025 levels, despite the exchange's push into new businesses. It also reduced the multiple used to value the company's EBITDA to 12 times from 20 times.
The downgrade follows a weak third-quarter earnings report from Coinbase last Thursday.
The exchange reported $1.22 billion in revenue, down 35% from a year earlier and little changed from the prior quarter. Transaction revenue fell 44% year over year to $590 million, while subscription and services revenue declined 20% to $570 million.
Trading conditions remained difficult as crypto market trading volume fell 10% during the quarter, while crypto price volatility reached multiyear lows.
The company's fourth-quarter outlook offered little sign of a sharp rebound. Coinbase reported about $165 million in transaction revenue through Oct. 25, while forecasting subscription and services revenue of $550 million to $630 million. It also expects adjusted expenses of $1.01 billion to $1.16 billion, up from $975 million in the third quarter.
For the full year, Coinbase lowered its adjusted expense forecast to $4.15 billion to $4.30 billion.
