Investing.com -- Baird designated Coinbase Global a Bearish Fresh Pick, warning that weak trading volumes are likely to drive a second-quarter revenue miss and that the stock's elevated valuation leaves it vulnerable to a significant derating.

Analyst David Koning told investors that expectations call for Q2 revenue to miss Street estimates by approximately 5%-6%, with volume growth likely down 15%-20% sequentially.

"April and May were two of the slowest months in the past few years," Koning wrote, noting that Robinhood's chief brokerage officer recently highlighted strength in equities, options, futures, and predictions but made no mention of crypto.

While early June volumes have shown some improvement, Baird said this may reflect heavy bitcoin selling rather than a sustained pickup in trading activity.

"We think it's due to significant trading out of bitcoin, which may be followed by limited interest in trading," the firm wrote.

Baird also said the CLARITY Act, a key regulatory framework for crypto, is unlikely to pass before the November midterm elections given legislative deadlock over ethics and crypto issuance issues.

The delay could accelerate competition from banks and fintechs operating within an established regulatory framework.

On valuation, Koning noted that Coinbase currently trades at approximately 35x 2027 estimated EPS, a premium that looks increasingly exposed.

"The combo of falling estimates and weak multiples across beat/raise fintechs could eventually bleed into COIN's valuation," the firm wrote. In a bear case scenario, Baird sees the stock falling to $75-$90 if 2027 EPS drops to $3 and the multiple compresses to 25-30x.

Baird’s Bearish Fresh Pick call expires on June 27. The firm lowered the COIN price target to $142 from $160.