Coinbase stock target cut after weak Q1 performance, Deribit deal praised: analyst

Coinbase expanded its global footprint in the crypto derivatives market with the acquisition of Deribit but the company’s Q1 report prompted a Wall Street analyst to revise his target lower.

In a note to clients on Friday, H.C. Wainwright analyst Mike Colonnese provided a detailed breakdown of Coinbase’s acquisition, earnings performance, and updated his outlook on the stock’s valuation.

Coinbase to acquire Deribit in $2.9b deal

In the largest crypto M&A deal to date, Coinbase announced plans to acquire Deribit for $2.9 billion, consisting of $700 million in cash and 11 million shares of Coinbase stock. Deribit is the world’s largest crypto options exchange with a 75% market share and over $30 billion in open interest.

Analyst Mike Colonnese sees the deal as a strong strategic fit, immediately making Coinbase the leading global crypto derivatives platform, while accelerating its international expansion and boosting cross-sell potential with spot and futures trading. Deribit is expected to be accretive to profitability, given its consistent positive EBITDA track record.

Q1 2025 earnings recap

Coinbase reported Q1 revenue of $2.03 billion, slightly below expectations, with trading volumes falling 10% quarter-over-quarter to $393 billion. Retail volumes dropped 17%, while institutional volumes declined 9%. Transaction revenue came in at $1.26 billion, down 19% sequentially and short of consensus.

Despite weaker transaction revenue, subscription and services revenue hit a record $698.1 million, up 9% quarter-over-quarter, driven by strong growth in USDC holdings and Coinbase One subscriptions. Adjusted EBITDA was $929.9 million (47.4% margin), below Q4’s $1.29 billion, while adjusted EPS was $1.94, in line with consensus.

Price target revised lower despite clear catalysts for growth

Despite what the analyst describes as a “monumental” Deribit acquisition, Colonnese revised his 2025 and 2026 revenue estimates downward to $7.4 billion and $9.5 billion, respectively, citing weaker-than-expected transaction volumes. He also lowered his adjusted EPS forecasts to $5.92 and $12.11, with a price target lowered to $305 from $350. Still, the analyst remains optimistic about Coinbase’s long-term outlook, particularly as the regulatory environment evolves.

“We believe greater regulatory clarity for crypto in the U.S., specifically as it relates to formal stablecoin and market structure legislation, which we could see this year, will prove to be a major tailwind for Coinbase, and will drive an acceleration of institutional participation into the space,” Colonnese wrote.

In addition, more than 200 firms including BlackRock and PayPal already rely on Coinbase’s infrastructure and more tarditional finance institutions will find it beneficial “to seek out” Coinbase’s products and services rather than build their own.

As such, “the stars are aligning for an extended bull market for crypto over the next 12 to 18 months,” the analyst wrote.