Coinbase stock slashed post-Q1 flop, but Deribit deal gets thumbs up: analyst

Holy smokes, Coinbase just blew up the crypto world with a massive acquisition of Deribit, but hold onto your hats because their Q1 report sent a Wall Street analyst scrambling to slash his target price!

In a jaw-dropping note to clients on Friday, H.C. Wainwright's Mike Colonnese broke down Coinbase's blockbuster deal, their earnings performance, and why he's hitting the brakes on the stock's valuation.

Coinbase to acquire Deribit in $2.9b deal

Get ready for the biggest crypto M&A deal you've ever seen - Coinbase is shelling out a staggering $2.9 billion to gobble up Deribit! We're talking $700 million in cold, hard cash and 11 million shares of Coinbase stock. Deribit ain't no small fry either - it's the world's top dog in crypto options with a whopping 75% market share and over $30 billion in open interest.

Colonnese is pumped about this move, calling it a perfect match that'll catapult Coinbase to the top of the global crypto derivatives game. It's like a turbo boost for their international expansion and a golden ticket to cross-sell with spot and futures trading. Plus, Deribit's been raking in the profits, so this is a total win for Coinbase's bottom line.

Q1 2025 earnings recap

Coinbase's Q1 numbers came in at $2.03 billion, a bit shy of what the street was hoping for. Trading volumes took a 10% nosedive to $393 billion, with retail volumes cratering 17% and institutional volumes dropping 9%. Transaction revenue? Only $1.26 billion, down a brutal 19% from last quarter and missing the mark.

But wait, there's a silver lining! Subscription and services revenue hit an all-time high of $698.1 million, up 9% from last quarter, thanks to USDC holdings and Coinbase One subscriptions going gangbusters. Adjusted EBITDA was $929.9 million (47.4% margin), down from Q4's $1.29 billion, while adjusted EPS came in at $1.94, right on the money.

Price target revised lower despite clear catalysts for growth

Even with this "monumental" Deribit acquisition, Colonnese had to take a step back and lower his 2025 and 2026 revenue forecasts to $7.4 billion and $9.5 billion, blaming those pesky weaker-than-expected transaction volumes. He also had to trim his adjusted EPS predictions to $5.92 and $12.11, slashing his price target from $350 to $305. But don't count Coinbase out just yet - Colonnese is still betting big on their long-term game, especially as the regulatory landscape shifts.

"We're on the edge of our seats waiting for more regulatory clarity in the U.S., especially around stablecoins and market structure. If we get that this year, it's going to be a rocket booster for Coinbase and bring a flood of institutional money into the space," Colonnese wrote.

And get this - over 200 heavy hitters like BlackRock and PayPal are already hooked on Coinbase's infrastructure, and more traditional finance giants are going to be lining up to use Coinbase's products and services instead of building their own.

So buckle up, because "the stars are aligning for an epic bull run in crypto over the next 12 to 18 months," the analyst declared.