Morgan Stanley (MS.US) plummets Coinbase (COIN.US) rating, and its price target drops to $120

According to Woofun AI, Morgan Stanley (MS.US) released the latest rating report on the US cryptocurrency exchange Coinbase (COIN.US) on November 2, EST, and officially downgraded its investment rating from “neutral” to “reduced holdings,” while drastically cutting the target price from $258 to $120, a drop of about 53%. This sharp adjustment directly reflects the agency's strong concerns about the short-term decline in market momentum.

The core logic behind this downgrade lies in the significant weakening of trading momentum and the uncertainty brought about by external black swan events. According to CNBC reports, Morgan Stanley analyst Michael Cyprys clearly stated in his report to clients that the weakening of overall trading activity in October, compounded the market panic caused by Binance (Binance) after the hacking attack, made the path of Coinbase's profit recovery extremely uncertain. Judging from stock price performance, the newly set target price of $120 is about 16% lower than Coinbase's closing price of $143.54 last Friday, indicating that the agency's correction of its current valuation far exceeds market expectations. The market reacted quickly, and Coinbase closed at $137.83 on Monday (early morning of November 3, Beijing time), down about 4% from last Friday. Looking at a long-term perspective, CNBC statistics show that as of last Friday, the stock price of Coinbase has dropped by about 22%, about 25% as of Monday's closing. This indicates that market sentiment has continued to be under pressure recently, and Morgan Stanley's downgrade has further exacerbated this downward trend.

Notably, Michael Cyprys emphasized in the report that their initial investment argument was based on expectations for profit reset in 2026 and a strong rebound in 2027, which depended on a recovery in cryptocurrency prices, increased retail participation, wider product adoption, and the release of operational leverage.

However, the weak pace of transactions in October and uncertainty in the crypto market directly challenged this recovery argument, forcing institutions to reassess their long-term growth potential.

In terms of financial forecasting, Morgan Stanley completely revised Coinbase's future revenue and profit expectations. According to data compiled by Woofun AI, the data quoted in the report shows that Coinbase's fourth quarter transaction revenue as of October 25 was approximately US$165 million. Based on this rapid estimate, full-quarter transaction revenue is expected to be around US$607 million. This figure is about 11% lower than the market consensus estimate of US$685 million, indicating that actual performance falls short of market expectations.

Additionally, Binance's $6.3 billion crackdown last week is thought to further cause crypto trading to stall, thereby depressing Coinbase's profits and share price. Based on this, Morgan Stanley lowered Coinbase's 2027 revenue estimate by 28% and adjusted profit before tax, interest, depreciation and amortization (EBITDA) estimate by 47%. According to CoinDesk, 2028 revenue and adjusted EBITDA estimates were also lowered by 18% and 25%, respectively. Morgan Stanley currently expects Coinbase's normalized EBITDA of $2.4 billion by 2028, which is about 14% below the 2025 level, reflecting the institution's pessimistic expectations for long-term profitability. In terms of valuation logic, Morgan Stanley reduced the EBITDA multiplier used for valuation from 20 times to 12 times. This adjustment further lowered the target price and reflected an increase in risk premium.

Despite Morgan Stanley's cautious approach, most Wall Street analysts remain relatively optimistic about Coinbase. According to LSEG data, of the 41 analysts tracking Coinbase, 26 gave a buy or strong buy rating and 13 gave a holding rating, which indicates significant differences within the market. A few days before Morgan Stanley's downgrade, Coinbase had just released its third-quarter earnings report. Total revenue was US$1,216 million, a decrease of 35% per year; transaction revenue was US$590 million, a decrease of 44% per year.

Despite the decline in revenue, net profit for a single quarter reached $719 million, mainly due to the increase in the value of crypto assets on the account. The results of this financial report showed that despite the challenges in the trading business, Coinbase remained profitable through asset appreciation, which may be the reason why some analysts maintained their buying ratings.

However, Morgan Stanley's downgrade reminds investors that profit models that rely on asset appreciation may be highly volatile and cannot offset the long-term impact of the decline in trading business.