Circle slides after Morgan Stanley downgrade, cut in price target
Reported by CoinDesk · AI-assisted summary by ChikoCorp AI News Desk
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Summary
Morgan Stanley downgraded Circle Internet's stock (ticker CRCL) from equal-weight to underweight and slashed its price target from $106 to $38. The downgrade reflects a weaker long-term earnings outlook driven by reduced forecasts for the supply of Circle’s USDC stablecoin through 2028. Analysts highlighted increased competition from tokenized cash products and stablecoin models, as well as concerns over declining reserve income and a shift towards lower-margin transaction revenue.
Why it matters
The downgrade signals potential challenges for Circle’s revenue and profitability, which could affect investor confidence and market perception of USDC's growth prospects. It underscores competitive pressures in the stablecoin market and highlights risks to Circle’s core revenue streams from changes in product demand and emerging rivals. This development also points to broader market dynamics influencing stablecoin economics and distribution strategies.
Key context
USDC is Circle’s dollar-backed stablecoin and its primary source of revenue, mainly via reserve income. Morgan Stanley cut its USDC supply forecasts by about 33% for 2027 and 44% for 2028, impacting earnings estimates negatively and reflecting concerns about reserve income sensitivity. Competition is growing from tokenized money market funds and deposits, such as BlackRock’s newly launched blockchain-based products. A new stablecoin model, Open USD, with shared governance and reserve economics, introduces further competitive pressures. JPMorgan recently downgraded Circle as well, citing weakened USDC economics from a revised agreement with crypto exchange Hyperliquid and a “prisoner’s dilemma” dynamic with Coinbase.
Key numbers and entities
Circle Internet (CRCL), USDC stablecoin, Morgan Stanley, analyst James Faucette, price target lowered to $38 from $106, USDC supply forecasts cut by ~33% for 2027 and ~44% for 2028, GAAP EPS estimates 3% below consensus for 2027 and 20% below consensus for 2028, transaction volume for agentic payments roughly $41,900 per day with an average transaction size of 24 cents, BlackRock’s blockchain money market products, JPMorgan, Coinbase, Hyperliquid.
What remains unclear
The source does not flag additional open questions or uncertainties beyond the noted challenges and competitive pressures impacting Circle’s outlook.