Coinbase’s lackluster second-quarter results could mean the stock’s momentum may start to wane, according to Compass Point Research. The firm downgraded Coinbase to sell from neutral in a Sunday note. It also trimmed its price target to $248 per share from $330, signaling more than 21% downside from Friday’s $314.69 close. Coinbase has been on fire this year, advancing more than 26%. COIN YTD mountain COIN year to date The rating change comes after Coinbase reported mixed second-quarter results last week. The company’s earnings per share beat analyst expectations, but revenue missed. Revenue tied to transactions, a key metric for the company, also came in below a StreetAccount consensus estimate. “COIN’s 2Q/3Q trends affirm weakening earnings despite an ongoing crypto bull market,” analyst Ed Engel said. “We see limited support for COIN’s valuation if crypto markets sell off further.” Engel also attributed part of the downgrade to potential weakness in the price of cryptocurrencies from here. “While we remain constructive on the current crypto cycle, we expect a choppy 3Q alongside weak August/September seasonality and waning retail interest in crypto treasury stocks,” Engel said. Flagship cryptocurrency bitcoin is up 22% year to date, trading above $114,000. Earlier this year, it reached $120,000 for the first time. The analyst also said he expects higher stablecoin competition to be a headwind. Stablecoins are cryptos that are pegged to fiat currencies, such as the dollar. At the same time, Engle noted that Coinbase’s valuation may have little room to expand. Coinbase trades at 44 times forward earnings, while the S & P 500 has a multiple of 23, per FactSet.
