Morgan Stanley has downgraded Coinbase Global Inc., one of the leading US-based cryptocurrency exchanges, to underweight from equalweight, significantly reducing its price target to $120 from $258. The move reflects growing concerns among analysts about the company’s ability to recover its earnings amid a prolonged slump in crypto trading activity and ongoing market uncertainty.
Outlook cut as crypto trading slows
Analyst Michael Cyprys from Morgan Stanley published a note on Monday, stating that confidence in Coinbase’s earnings rebound has weakened in light of subdued trading volumes, a softer revenue trajectory, and overall uncertainty following the recent Binance hack. He indicated that weaker trading activity and diminished investor engagement are clouding the exchange’s growth prospects.
Confidence in the earnings recovery has deteriorated as trading volumes and crypto market sentiment remain weak, explained Michael Cyprys in his client note.
Coinbase reported a 35% decrease in revenue in the third quarter compared to the previous year, with overall crypto trading volumes remaining low even as digital asset prices showed some signs of recovery. The company announced third-quarter revenue at $1.22 billion, with transaction fees falling 44% to $590 million and subscription and services revenue declining by 20% to $570 million over the same period.
Morgan Stanley reduced its revenue and profitability forecasts for Coinbase through 2028. For 2027, the bank cut its revenue expectation by 28% and slashed its adjusted EBITDA projection by 47%. Forecasts for 2028 were also lowered, with revenue estimates down 18% and adjusted EBITDA down 25%. The bank now predicts Coinbase will generate $2.4 billion in normalized EBITDA by 2028, which is about 14% lower than 2025 levels despite new product initiatives.
The multiple used to value Coinbase’s EBITDA was also scaled back to 12 times earnings, down from 20 times previously used by Morgan Stanley. The bank attributed this adjustment to persistent questions about trading activity and competitive pressures in the digital asset ecosystem.
COIN, the publicly traded stock of Coinbase, traded 2.3% lower in early Monday trading at $140.25, building on a 10% decline recorded over the past week.
Limited signs of near-term recovery
The downgrade follows a challenging period for both Coinbase and the broader cryptocurrency industry. Third-quarter crypto trading volumes dropped 10%, while market volatility reached multi-year lows, further pressuring fee-dependent exchanges.
Coinbase’s outlook for the fourth quarter suggested a moderate transaction revenue figure, with the company reporting $165 million in transaction revenue through October 25. It forecast fourth-quarter subscription and services revenue to come in between $550 million and $630 million. Meanwhile, adjusted operating expenses are expected to increase to a range of $1.01 billion to $1.16 billion, up from $975 million in the previous quarter. The company also reduced its full-year adjusted expense guidance to between $4.15 billion and $4.30 billion.
Although Coinbase has taken steps to expand into new areas of business, subdued trading activity and uncertainty in the regulatory environment have weighed on results and outlooks for the months ahead.
Despite efforts to diversify revenue streams, trading remains a core business for Coinbase, making its performance highly sensitive to overall market sentiment and investor participation in digital assets.
Morgan Stanley’s revised stance comes as several major crypto market incidents, including security incidents at competitors such as Binance, continue to influence sentiment and trading behavior across the industry.
Mini dictionary: Coinbase is a publicly listed cryptocurrency exchange established in 2012, known for providing a secure platform for buying, selling, and storing a wide variety of digital assets for retail and institutional clients.
| Year | Revenue Forecast Change | Adjusted EBITDA Forecast Change |
|---|---|---|
| 2027 | -28% | -47% |
| 2028 | -18% | -25% |
