Coinbase: The Time To Be Really Greedy Has Passed (Rating Downgrade)

Summary Q1 financials show solid revenue growth and a promising services trajectory, especially as stablecoins gain traction. Profitability is closely tied to Bitcoin’s performance; rising BTC prices directly benefit the business. Valuation metrics like P/S and P/E suggest fair value to overvaluation while technicals are overbought. While strong opportunities remain, the stock is now a hold; it will be a buy if it drops 20%+. Introduction Coinbase Global Inc. ( COIN ) is a stock that I have been covering very frequently since I’ve started contributing to Seeking Alpha in March 2025. Here is the link to my previous two coverages which I suggest reading first. On April 10, I rated COIN a Strong Buy, in what was an article of great conviction. My main thesis was (and still remains) that they would severely underperform in Q1 2025 (which they did) but excel in remaining 2025 quarters, especially further towards year-end, aligning with cryptocurrency price cycles. On May 12, I reiterated my bullishness but downgraded to buy, as a result of higher valuations and weaker technicals. The returns after these two pieces stand at 111%, respective 73%. Data by YCharts Today, I will revisit Coinbase and outline my case for why I think it has become a Hold. Spoiler alert: In addition to having already reached my price target of $330, this is due to a much higher valuation and less favorable technicals again. Developments We remember Q1 2025 financials , which saw revenues of $2B and net income of $66M. Adjusted EBITDA was $930M and just slightly down YoY. Services continue to make up a larger share of COIN’s revenues as QoQ, this share grew from 28% to 36%. The growth trajectory of services is truly significant for Coinbase as it both diversifies their revenue streams and makes them more predictable, a feature Coinbase has clearly lacked before (but I would argue they still do). Overall, analysts on Seeking Alpha seem to get super excited about the service revenue growth and rate Coinbase a Buy mostly based on them. Personally, I believe that service revenue growth will not stick at current rates in a crypto bear market whatsoever and might actually slightly decline (which would still be good as it offers a buffer of predictable revenue). Further, projected rate cuts would also be detrimental to the stablecoin part of their business, earning revenue from interest. The recently passed GENIUS bill does limit my stance somewhat, as it brings clear regulatory approval to stablecoins like USDC – of which Coinbase is a key stakeholder. Coinbase earns 100% of interest income from USDC held on their platform and 50% of all other interest income. With many companies now focusing on stablecoins, USDC seems like a good choice and should see further adoption, benefiting Coinbase. For now, Coinbase is only lavishly profitable when Bitcoin prices rise, and they can report high net income due to a combination of higher transaction revenues and holdings gains. Cycle theory suggests Bitcoin price gains may come to an end in early 2026. COIN will have to prove that they can withstand such a period. At the same time, they are valued at high multiples (I will get to them in a second) which makes them much more susceptible to multiple compression, a scenario likely to occur in a crypto bear market, or an intensified global trade war , or an actual global war . These are key risks to every stock, which I get, but trading at extended valuations does make Coinbase more sensitive for such scenarios. When it comes to this year, I do see a breakout of recent Bitcoin ATHs, with a price target of $150k. I derived this price target from working through the Bitwise Bitcoin Investment Thesis paper, published in Spring 2024, which I suggest readers to go through as well. The Bitcoin halving reduces the supply which necessitates the price to move up in order to create an equilibrium. Their model saw $103k as a price target for year-end 2024. This was super close to the $108k reached mid-December and even slightly conservative. For late 2025, they estimate $172k, making my price target achievable. Valuation At a 13.5X P/S ratio, COIN’s valuation has shot up drastically. Their P/E ratio of 65X also looks very stretched. For me, these levels are still not extended too much as I expect Coinbase to grow their revenues and most importantly profits significantly into year-end 2025, which will make these levels drop substantially. Still, they are much higher than in both my previous coverages, which increases the risk associated with investing in Coinbase. Data by YCharts Personally, I also find it useful to check COIN’s valuation compared to Bitcoin as they are very closely correlated. In my last analysis, Coinbase was trading below Bitcoin on the one-year chart, but now it shot above it again, which might be an indication that most of the short-term appreciation has been achieved already. Data by YCharts On the weekly COIN chart, the high green bar in the MACD cannot be missed. Also, price just skyrocketed through the upper ends of the Bollinger Bands, which has led to pullbacks every single time for the last two years. TradingView Monthly RSI is at a key resistance as well, sitting at 64. These were the same levels this bull market has seen twice, shortly before going into correction mode. TradingView Daily RSI as well as distance from the 200-day MA both look very stretched. Historically, these have also led to pullbacks. TradingView $4.5B of net income in 2025 (or on a TTM basis after Q3 2024) could be doable when crypto bull markets continue. The market has to be unaware of a cyclical top that is being built up. In that case, Coinbase could be trading at a 25X P/E ratio, which would bring the market cap to $112.5B, a gain of 29% from today. So why am I not rating the stock a Buy when it could return almost 30% in 6 months? Well, first, this is an optimistic scenario and second, the perceived risk has gone up a lot. As of my previous coverage, there have been much better risk/reward opportunities to buy Coinbase. But due to the upside potential it is still a Hold with the chance to become a Buy again, if an expected pullback of 20+% manifests. This would increase investors’ margin of safety, as one can use more conservative assumptions at those prices for the same upside potential (say just $4B in net income at a 22.5X P/E = 25% implied upside potential after a 20% drop in price) Conclusion Strong opportunities do remain for Coinbase, particularly amid crypto bull market continuation and now stablecoin adoption. However, valuation has expanded substantially, which I anticipated but do not want to keep betting on at these levels. Technical indicators also suggest the stock could use a short-term breather. To be clear, I am not calling for a crash or suggesting Coinbase is necessarily a bad investment. I simply prefer a cheaper price to maintain a healthy uptrend and reenter after having sold 20% of my position on this spike. I may have been slightly too conservative on COIN, but that is not an issue given I still hold shares bought at attractive entry points. All in all, while it is not the worst buy today, it’s also not the best anymore. Hold . A 20+% pullback might change my opinion which I would give an update to (either in the comments or in the form of a new article given there are enough updates until then.)

Source: Seeking Alpha