Morgan Stanley downgrades Coinbase and cuts price target by more than half

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Morgan Stanley downgrades Coinbase

Highlights

Morgan Stanley cuts Coinbase target to $120.
The bank lowers 2027 EBITDA forecasts by 47%.
Weak crypto trading clouds earnings recovery.

Analyst Michael Cyprys lowered Coinbase's rating from Equal Weight to Underweight and reduced the price target from $258 to $120, according to Crypto Briefing. The revised target implies approximately a 16% downside from the stock's October 30 closing price of $143.54, reflecting concerns about weaker trading revenue, uncertain cryptocurrency market conditions, and declining profitability expectations.

Morgan Stanley sharply reduces Coinbase earnings forecasts

The downgrade follows Coinbase's disappointing third-quarter results, released October 30, which raised questions about the exchange's ability to restore earnings growth. Several other investment banks had already reduced their price targets, suggesting broader concern about the company's near-term prospects.

Morgan Stanley lowered its Coinbase revenue forecasts by 28% for 2027 and 18% for 2028. The reductions to profitability estimates were even larger, with projected adjusted earnings before interest, taxes, depreciation and amortization cut by 47% for 2027 and 25% for 2028.

The bank now expects normalized EBITDA of $2.4 billion in 2028, approximately 14% below the company's 2025 level. That forecast suggests Coinbase could remain less profitable for several years despite efforts to expand its business beyond cryptocurrency trading.

The analyst also reduced the valuation multiple applied to Coinbase's projected EBITDA from 20 times to 12 times. Combining lower earnings expectations with a smaller valuation premium explains much of the substantial reduction in the share price target.

Cryptocurrency trading weakness adds pressure

Coinbase remains heavily exposed to changes in digital asset trading activity, making transaction volumes an important driver of revenue. When cryptocurrency investors reduce trading, the exchange faces weaker fee income, even as it develops additional products and services.

Recent market uncertainty has complicated that outlook. A major security breach at rival exchange Binance has added to concerns across the cryptocurrency industry, contributing to weaker trading sentiment and reduced activity.

Coinbase shares also faced pressure following their quarterly earnings disappointment, with the stock reaching a two-year low. The shares declined more than 1% in premarket trading Monday as investors assessed the downgrade alongside broader weakness in digital assets.

Lower valuation raises the stakes for Coinbase

Morgan Stanley continues to recognize Coinbase's competitive position and broader product offering, but its revised forecasts suggest those advantages may not translate into stronger earnings soon.

The $120 target represents a substantial reassessment of the exchange's financial prospects. For investors, the central question is whether trading volumes can recover enough to support revenue growth and justify a higher valuation.

Until cryptocurrency market activity improves, Coinbase could struggle to regain investor confidence, particularly if future earnings continue to fall short of expectations.

We also reported Coinbase adds Ripple stablecoin RLUSD to the exchange offering.

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