Investing.com -- Compass Point analysts downgraded Coinbase (NASDAQ:COIN) to a Sell rating, citing concerns ahead of the company’s upcoming 1Q earnings results on May 8. 

The downgrade reflects the analyst’s cautious stance due to the expected disappointing performance in both 1Q and 2Q.

The analysts highlighted a decline in retail trading activity, which is said to have been further exacerbated by a shift towards lower-margin institutional trading.

In fact, the firm said "Coinbase’s 1Q trading volumes declined 12% QoQ," a notable drop compared to the broader industry, where volumes were down 18%. 

While the company’s market share improved slightly by 50bps, it was said to be largely driven by institutional trading, which over-indexes on Bitcoin (BTC), while retail trading generally focuses on altcoins.

The analysts are also wary of "disappointing 2QTD trends," noting that "retail trading has dropped off materially" since January, which could lead to weaker-than-expected results. 

They are forecasting "2Q transaction revenue of $863 million, vs the Street’s $1.141 billion," signaling a potential downside of 24%.

Moreover, Compass Point raised concerns about Coinbase’s long-term growth, pointing out that decentralized exchanges (DEXs) are increasingly taking market share from the company’s higher-margin retail segments. 

"DEXs on Solana and Base are increasingly capturing mass-market retail users," which could further challenge Coinbase’s competitive position.

With the company facing a "lower-margin mix shift" and increasing competition, Compass Point has reduced its 2025 estimates and set a new price target of $180, marking a potential 14% downside for the stock.

Related articles

Coinbase stock downgraded as analyst cautious heading into 1Q results

Boeing shares up in premarket as Bernstein upgrades to Buy on improved outlook

Shein, Temu hike US prices as Trump tariffs loom