Coinbase Global recently released its fourth-quarter earnings report, offering insights into the company’s financial health amidst ongoing challenges in the cryptocurrency market. While the results were better than some analysts anticipated, the firm continues to grapple with significant pressures stemming from a sharp decline in cryptocurrency prices. This decline impacts its trading, staking, and custody businesses, prompting a reassessment of its stock valuation.
Morningstar’s analysis has led them to decrease their fair value estimate for Coinbase from $188 to $160 per share. This adjustment reflects concerns about a significant drop in near-term trading revenue projections, as the total market capitalization of cryptocurrencies has plummeted by over 45% since its peak in October. Morningstar forecasts a decrease in trading revenue of about 20.6% for the year 2026, with a recovery not expected until 2028. However, the anticipated growth in subscription and service revenue, mainly driven by the firm’s stable coin operations, is projected to rise by 14% next year, somewhat mitigating the revenue losses.
Despite its reliance on cryptocurrency prices, Coinbase has made strides in reducing that dependence by expanding its recurring revenue sources and diversifying its business. While further declines in earnings are anticipated, the company is expected to remain profitable—a contrast to the severe losses experienced during the last crypto downturn in 2022.
Morningstar assigns a 3-star rating to Coinbase stock, suggesting it is fairly valued based on their long-term fair value estimate, which reveals a high price-to-earnings ratio attributed to the volatility in cryptocurrency markets. Key components influencing this estimate include trading volume assumptions and interest income projections from its partnership with Circle for the USDC stable coin.
Though Coinbase holds the position of a leading U.S. cryptocurrency exchange, Morningstar believes it does not possess a significant economic moat. The company has established itself as a trustworthy and compliant platform in an otherwise risky industry, allowing it to maintain higher fees than some competitors. This reputational advantage has been bolstered by the downfall of rival exchanges, such as FTX, although there are concerns about long-term fee compression.
Financially, Coinbase appears robust, holding over $11.2 billion in cash and nearly $2 billion in cryptocurrency investments against $7.2 billion in debt as of December 2025. This stable financial position is key to helping the company navigate the volatility characteristic of the cryptocurrency market. The decision to retain substantial cash reserves is seen as a prudent strategy to ensure sustainability during prolonged market downturns.
However, the company is not without risks. Morningstar assigns Coinbase a “Very High” Uncertainty Rating, highlighting its heavy reliance on trading fees, which comprise more than half of its revenue. This exposes Coinbase to the cyclical nature of the cryptocurrency market, which can lead to drastic fluctuations in revenue. The company’s efforts to diversify and grow recurring revenue sources, such as its stable coin business, are crucial in mitigating these risks.
Proponents of Coinbase cite a potentially more favorable regulatory landscape under the current administration, which could provide clarity and boost the firm. The ongoing adoption of stablecoins may further enhance revenue streams, and international regulatory approvals could facilitate global expansion.
Conversely, critics point to the cyclical volatility of cryptocurrency markets, which could continue to exert pressure on Coinbase’s performance. Increased competition arising from a more favorable regulatory environment could challenge its market dominance, and a decline in interest rates could negatively impact its stable coin revenue.
As Coinbase continues to navigate these complex dynamics, its future will hinge on both market conditions and its ability to adapt to an evolving regulatory landscape.
