TD Cowen says buy stablecoin issuer Circle. Morgan Stanley thinks it’s time to sell
TD Cowen thinks a turnaround for Circle Internet Group may be in the cards, yet Morgan Stanley thinks it may be time to dump the stock.
Morgan Stanley has reduced its rating for Circle Internet to underweight and lowered its price target to $38, down from $106, due to a weaker long-term earnings outlook. The stock has fallen approximately 30% year-to-date, with investors concerned about the outlook for Circle's dollar-backed stablecoin, USDC, which is the company's primary revenue source.
Analyst James Faucette expects USDC growth to slow as reserve income is pressured and Circle shifts towards lower-margin transaction revenue. The bank has cut its USDC supply forecasts by about 33% for 2027 and 44% for 2028, leading to GAAP earnings-per-share estimates that are roughly 3% below Wall Street consensus in 2027 and 20% below consensus in 2028.
Morgan Stanley also notes increasing competition from tokenized money market funds and deposits, which could reduce USDC balances and revenue from reserves. BlackRock recently entered the stablecoin market with new blockchain-based money market products. Additionally, Circle's push into agentic payments is facing skepticism due to falling transaction volume and a low average transaction size.
Morgan Stanley highlights a bearish outlook, citing JPMorgan's downgrade and the prisoner's dilemma between Circle and Coinbase, where both companies may compete for USDC distribution at the expense of profitability.
Written by urgent.news from CoinDesk's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
