Morgan Stanley has lowered its rating on Coinbase Global to Underweight from Equal-weight and cut its price target by more than half, from $258 to $120. The move, announced Monday by analyst Michael Cyprys, reflects reduced confidence that the cryptocurrency exchange will see a sharp rebound in profits in the coming years.

The new target implies further downside from Coinbase’s October 30 close of $143.54. Shares extended recent losses following the bank’s note, trading near $138 to $140 in Monday sessions after a more than 10% decline the prior week.

Reasons Behind the Downgrade

Cyprys pointed to weaker recent trading activity, a softer forward revenue outlook and broader uncertainty in the cryptocurrency market. The bank specifically referenced fallout from a reported $6.3 billion security breach at Binance as a factor that could further dampen trading confidence and volumes across centralized exchanges.

In the research note, Cyprys stated that while Coinbase continues to execute on its broader strategy, recent trading trends and the softer revenue picture suggest a weaker recovery than previously anticipated. The bank had earlier expected a 2026 earnings reset followed by a sharp rebound in 2027 driven by recovering crypto prices, higher retail engagement, broader product adoption and operating leverage.

Morgan Stanley still regards Coinbase as one of the strongest platforms in the sector. However, it now sees greater downside risk to both earnings and the stock’s valuation.

Sharp Cuts to Financial Forecasts

The bank reduced its 2027 revenue estimate by 28% and its adjusted EBITDA forecast by 47%. For 2028, revenue projections fell 18% and adjusted EBITDA estimates dropped 25%. Morgan Stanley now expects Coinbase to generate $2.4 billion in normalized EBITDA by 2028, a figure about 14% below 2025 levels despite the company’s expansion into newer products.

The valuation multiple applied to EBITDA was also lowered, from 20 times to 12 times. The combination of reduced earnings estimates and a lower multiple produced the steep cut in the price target.

Recent Earnings Provide Context

The downgrade follows Coinbase’s third-quarter results, reported late last week. Net revenue came in at approximately $1.16 billion to $1.22 billion, down roughly 34% to 35% year over year and below some prior expectations. Transaction revenue, the fees earned from trading, totaled $590.2 million, a 44% decline from the year-earlier period. Subscription and services revenue fell about 20% to $570.2 million.

Net income reached about $719 million, driven largely by gains on cryptocurrency investments. Adjusted net income was substantially lower at $78 million. Adjusted EBITDA stood at $332.9 million, down sharply from the prior year.

Early fourth-quarter data also pointed to continued softness. Transaction revenue through October 25 was reported near $165 million, implying a full-quarter pace of roughly $607 million if the trend held, about 11% below consensus estimates at the time.

Coinbase has reported growth in certain non-trading areas, including prediction markets that surpassed $200 million in annualized revenue and record levels of Coinbase One subscribers. Retail spot trading, however, remains a meaningful portion of projected future revenue in the bank’s models.

The downgrade adds to pressure on crypto-linked equities that already sold off after the earnings release and amid the broader market reaction to the Binance incident.