Morgan Stanley bearish on Coinbase, slashes target on weaker recovery

Morgan Stanley has reduced its rating on Coinbase to Underweight and lowered its price target to $120 from $258 in a recent report to clients. Analyst Michael Cyprys cited declining confidence in an earnings recovery, pointing to recent trading trends, a softer forward revenue outlook, and uncertainty regarding the crypto market post-Binance hack as factors contributing to the weaker recovery than expected.

The bank's third-quarter revenue of $1.22 billion fell 6% short of its forecast. Transaction revenue through October indicates a fourth-quarter run rate of about $607 million, 50% below the bank's previous estimate and 11% lower than what analysts expected. The Binance security breach, which resulted in $6.3 billion in losses, may further shake confidence in centralized crypto platforms, potentially leading to increased regulatory scrutiny, despite Coinbase not being directly impacted.

Morgan Stanley has decreased its revenue forecasts for 2027 and 2028 by 28% and 18%, respectively, and reduced adjusted EBITDA estimates by 47% and 25%. The revised 2028 adjusted EBITDA forecast stands at $2.4 billion, a 14% drop from 2025. Despite Coinbase diversifying into prediction markets, which now generate over $200 million in annualized revenue, retail spot trading still accounts for around 40% of the bank's projected 2027 revenue.

While Coinbase is seen as one of the strongest platforms in the crypto space, Morgan Stanley views it as more vulnerable to lower earnings and valuation, leading to a downgrade to Underweight.