Summary Coinbase faces revenue headwinds as lower interest rates threaten to slow growth in stablecoin interest income, which currently contributes nearly 20% of overall revenue. Operating expenses in sales, R&D, and G&A are rising due to acquisitions and headcount growth, creating potential margin pressure into 2026 as management frames 2025 as an investment year. Coinbase trades at a lower premium vs. sector peers and vs. own history, but flat earnings expectations limit how much this valuation discount can support the stock. COIN has failed multiple times at a key technical resistance level vs. the S&P 500, and recent price action suggests growing risk of downside and underperformance ahead. A more accommodative regulatory environment globally remains an upside risk that could expand Coinbase’s market opportunities. Performance Assessment Coinbase ( COIN ) initially rallied well, but recently it has corrected sharply, erasing the gains and outperformance vs. the broader market: Performance since Author's Last Article on COIN (Seeking Alpha, Author's Last Article on COIN) Thesis I am becoming more bearish on COIN stock: Stablecoin revenue is vulnerable rate cuts FY26 is likely to see some margin pressure from increased expenses There is some valuation discount but the earnings expectations index is flat Coinbase has failed to break resistance multiple times and now looks like it might go lower An easing regulatory environment is a source of upside risk Stablecoin revenue is vulnerable rate cuts Whilst I still believe increasing stablecoin adoption is accretive for Coinbase and Circle's ( CRCL ) market-leading USDC stablecoin monetization, I am concerned that rate cuts could be a headwind for stablecoin interest income revenues earnt from holding USDC reserves. Looking one year out, we see that there is a 92.9% chance of a Fed rate cut: Fed Funds Rate Probabilities in Dec'26 (CME FedWatch, Author's Annotations) I expect the lower interest rates to have an incremental slowdown impact on the rate of stablecoin interest income revenues: Stablecoin revenues (USD mn) (Company Filings, Author's Analysis) As of Q3 FY25, this revenue stream makes up almost 20% of the company's overall revenue mix. Hence these headwinds are likely to impact the overall revenue outlook as well. Given this context, it is interesting to see that over the last month, there have been net downward revisions in the Wall St's revenue consensus for COIN stock: Consensus Revenue Estimate Revisions (Capital IQ, Author's Analysis) Note that the overall revenues trend has not really had a strong directional trend over the last 1.5 years: Revenues (USD mn) (Company Filings, Author's Analysis) FY26 is likely to see some margin pressure from increased expenses Coinbase's operating expense margins in S&M, R&D and G&A have been increasing over the past couple of quarters and this is weighing down on operating EBIT margins: Opex Margin Drivers and EBIT Margins (Capital IQ, Author's Analysis) The outlook for Q4 suggests increased spends particularly in R&D and G&A due to headcount growth and acquisition impacts: On the expense side, our expense range is higher quarter-over-quarter for tech & dev and G&A in the range of $925 million to $975 million, up approximately $100 million at the midpoint. Approximately half of this increase is due to the recent acquisitions of Deribit and Echo. The remainder of the quarter-over-quarter increase is largely due to headcount growth, which we expect to grow at a slower rate in the fourth quarter as compared to the third quarter. - CFO Alesia Jeanne Haas in the Q3 FY25 earnings call This $950 million midpoint guidance for R&D and G&A corresponds to a 11.9% QoQ increase. This makes me a bit queasy when the revenue growth outlook is fuzzy. I am not particularly encouraged by management's commentary that labels 2025 as an "investment year" and the initial 2026 as a period of "moderate growth" and "digestion": As we look forward to the first quarter of 2026, we really think of that as digestion. As we go into 2026, we're digesting the growth that we absorbed in 2025. We are going to focus on scaling new products that went from 0 to 1 to get them to 1 to 10. We are going to focus on bringing everybody kind of to their full potential at Coinbase, making sure that those folks that have been with us 3 months are operating the same speed of those that have been with us for 2 years. And so we will see sequential growth Q1 versus Q4, but at a much, much more moderate level. So really think of it as a digestion year with more moderate growth where 2025 was a big investment year. - CFO Alesia Jeanne Haas in the 2025 Goldman Sachs US Financial Services Conference I think this is all a euphemism for potential margin pressure and lower growth in the early part of 2026. There is some valuation discount but the earnings expectations index is flat COIN is trading at a 1-yr fwd PE of 40.1x, which corresponds to a 59% premium to the 25.2x median of similar sectoral comp companies: 1-yr fwd PE Comps (Capital IQ, Author's Analysis) Now although COIN is more richly valued vs. these sectoral comps, I will acknowledge that the degree of the premium is less than the typical 96.7% that COIN has commanded over the other companies: COIN 1-yr fwd PE vs. Sector vs. Time (Capital IQ, Author's Analysis) Also, the company's 1-yr fwd PE today is at a 22.7% discount to its own longer term 1-yr fwd PE median of 51.9x: COIN 1-yr fwd PE and MCAP (USD mn) (Capital IQ, Author's Analysis) So overall, there is a case to be made for COIN's valuation looking less demanding right now. However, this may not be enough to really shift the bullish view on its own because from a fundamental driver perspective, the earnings expectations index remains rather flat: 1-yr fwd PE Drivers (Capital IQ, Author's Analysis) Coinbase has failed to break resistance multiple times and now looks like it might go lower If this is your first time reading a Hunting Alpha article using Technical Analysis, you may want to read this post , which explains how and why I read the charts the way I do. All my charts reflect total shareholder return as they are adjusted for dividends/distributions. Relative Read of COIN vs SPX500 COIN vs SPX500 Technical Analysis (TradingView, Author's Analysis) The relative monthly charts of COIN vs. SPX500 show a whopping 4 failures to clear a major resistance level. The current Dec'25 candle looks like it is making a bearish engulf with a long top wick rejection. I see these signs as signals of a move lower. An easing regulatory environment is a source of upside risk The momentum from the GENIUS Stablecoins Act is flowing over as the Digital Asset Market CLARITY Act is expected to pass in H1 FY26. This bill would formally categorizes crypto assets as digital commodities, removes a lot of legal ambiguity and reduces compliance burdens. I believe Coinbase is well-positioned to benefit from these developments and extend its market leadership as a well-capitalized, US-regulated player. More broadly and thematically, these are encouraging signs that regulators are being more accommodative to crypto and related businesses: We've obviously, in the United States, had a sea change. I mean Europe led with MiCA. We've had leadership in Singapore to bring crypto regulation forward in other countries. But the U.S. had really, in the past administration, been quite antagonistic against the industry. So I cannot tell you what a sea change it's been, what the pendulum has shifted in the other direction. - CFO Alesia Jeanne Haas in the 53rd Annual Nasdaq Investor Conference MiCA is the European Union’s regulatory framework for crypto‑assets And this can open up more opportunities for Coinbase. Indeed, it is already looking to capitalize with initiatives such as expanding into offering US stock trading , prediction markets and tokenized equities . Takeaway & Positioning I suspect COIN is likely to head into FY26 with underperformance as revenue growth may be challenged as the stablecoin segment faces lower yields from rate cuts and increased margin pressure from headcount and post-acquisition expenses. COIN stock valuations are trading lower, but this alone does not seem like enough as the earnings expectations index remains flat. Technically vs. the S&P500, the stock has failed to break a major monthly resistance level 4 times, signaling potential downside and underperformance ahead. Stablecoin revenue is vulnerable rate cuts FY26 is likely to see some margin pressure from increased expenses There is some valuation discount but the earnings expectations index is flat Coinbase has failed to break resistance multiple times and now looks like it might go lower An easing regulatory environment is a source of upside risk Rating: 'Underperform/Sell' How to interpret Hunting Alpha's ratings: Strong Outperform/Strong Buy: Expect the company to outperform the S&P500 on a total shareholder return basis, with higher than usual confidence. I also have a net long position in the security in my personal portfolio. Outperform/Buy: Expect the company to outperform the S&P500 on a total shareholder return basis Market Perform/Hold: Expect the company to perform in-line with the S&P500 on a total shareholder return basis Underperform/Sell: Expect the company to underperform the S&P500 on a total shareholder return basis Strong Underperform/Strong Sell: Expect the company to underperform the S&P500 on a total shareholder return basis, with higher than usual confidence The typical time-horizon for my views is multiple quarters to more than a year. It is not set in stone. However, I will share updates on my changes in stance in a pinned comment to this article and may also publish a new article discussing the reasons for the change in view.
