Key facts
- Morgan Stanley downgraded Circle Internet to underweight and lowered its price target to $38 from $106.
- The downgrade was attributed to a weaker long-term earnings outlook, driven by pressure on reserve income and a shift to lower-margin transaction revenue.
- Morgan Stanley reduced its USDC supply forecasts for 2027 and 2028, leading to below-consensus EPS estimates.
- Increased competition from tokenized cash products, money market funds, and new stablecoin models were cited as risks.
- Circle's agentic payments initiative showed limited commercial adoption, with low daily transaction volumes.
- A previous downgrade from JPMorgan highlighted concerns over Circle's revised agreement with Hyperliquid.
Morgan Stanley downgraded shares of Circle Internet to underweight from equal-weight and reduced its price target to $38 from $106, citing concerns over the long-term earnings outlook for the company's USDC stablecoin.
The bank's analyst, James Faucette, noted that USDC contraction exposes reserve income sensitivity and suggests a shift toward lower-margin transaction revenue. Morgan Stanley reduced its USDC supply forecasts for 2027 and 2028, leading to earnings-per-share estimates that are below Wall Street consensus for those years.
Morgan Stanley also highlighted increasing competition from tokenized money market funds and new stablecoin models, such as Open USD, which could impact Circle's revenue and distribution incentives. The firm expressed skepticism regarding the commercial adoption of Circle's agentic payments initiative, citing low daily transaction volumes and average transaction sizes.
This bearish assessment follows a similar downgrade from JPMorgan, which previously raised concerns about Circle's economics following a revised agreement with crypto exchange Hyperliquid. The report suggested a potential competitive dynamic between Circle and Coinbase regarding USDC distribution that could impact profitability.