TLDR
- Argus Research downgraded Coinbase from Buy to Hold with no price target due to valuation concerns and rising expenses
- The stock fell as much as 5% to $243.18 following the downgrade announcement
- Coinbase trades at 39x 2026 earnings estimates compared to 24x-27x for other major exchanges
- Argus cut its 2026 EPS estimate to $6.55 from $9.56 and lowered long-term growth forecast to 10%
- Despite concerns, Wall Street maintains a Moderate Buy rating with 23 of 38 brokerages recommending buy or higher
Coinbase shares dropped following a downgrade from Argus Research. The investment firm cut its rating from Buy to Hold and removed its price target entirely.
The stock fell as much as 5% to $243.18 in early trading. This marks a rough day for the crypto exchange despite its recent addition to the S&P 500.
Argus analyst Kevin Heal pointed to two main issues. First, the company’s valuation has gotten stretched. Second, management continues to spend heavily on growth initiatives.
The brokerage believes much of the good news is already baked into the stock price. This includes both the S&P 500 inclusion and strong recent quarterly results.
Coinbase reported solid third-quarter earnings with a rebound in trading volume. But Heal remains concerned about what’s happening behind the scenes.
The company invests aggressively in research and development. It also pursues acquisitions to expand its platform and services.
These investments will likely push expenses higher in the coming quarters. That’s a problem when you’re already trading at a premium valuation.
Valuation Gap Widens
Right now, Coinbase trades at 39 times Argus’s updated 2026 earnings estimate. That’s a steep premium compared to traditional exchanges.
Major exchanges typically trade between 24 and 27 times forward earnings. The gap between Coinbase and its peers has widened considerably.
Heal said the firm would consider upgrading again once valuations align better with industry standards. For now, they’re sitting on the sidelines.
Argus slashed its 2026 earnings per share estimate to $6.55 from $9.56. The firm also lowered its long-term growth forecast to 10%.
Trading Volatility Concerns
Heal raised questions about investor commitment to crypto trading. Market volatility remains a constant in the crypto space.
Some traders may start pulling back if conditions don’t stabilize. That could hurt Coinbase’s core business of facilitating trades.
However, potential U.S. crypto legislation offers a bright spot. New regulations could drive transaction growth and provide more clarity for the industry.
The stock is down roughly 2% year-to-date when including the current session’s moves. That’s despite a strong rally earlier in the year.
Wall Street analysts aren’t entirely bearish on Coinbase. Out of 38 brokerages, 23 rate it buy or higher.
Fourteen analysts have hold ratings while just one recommends selling. The median price target sits at $400 per share.
That target implies about 60% upside from current levels. The average target from a smaller sample is $396.30.
Argus’s downgrade doesn’t mean they’ve given up on Coinbase entirely. They’ve simply moved to the sidelines until the risk-reward balance improves.
The hold rating suggests waiting for either a pullback in price or stronger earnings growth. Right now, the premium valuation leaves little room for error.
Management’s aggressive spending strategy aims to position Coinbase for long-term growth. But that strategy comes with near-term cost pressures that investors need to watch.
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