Circle Downgraded by Morgan Stanley Amid Slower Stablecoin Growth

Circle Internet Group's shares declined by 6% in premarket trading on Monday following Morgan Stanley's downgrade and TD Cowen's initiation of coverage.

Morgan Stanley reduced its rating to Underweight from Equal Weight and slashed the price target to $38 from $106, citing slower-than-expected growth for Circle's dollar-pegged stablecoin, $USDC. The brokerage also noted that while payment companies are increasingly embracing stablecoin technology, practical adoption remains limited.

Morgan Stanley analysts observed that 'stablecoin activity remains overwhelmingly skewed toward crypto trading and transfer activity rather than payments.' They further stated that while there are growing use cases in cross-border B2B transactions and consumer remittances, these have not yet demonstrated the ability to create durable balances or recurring transaction economics needed to offset pressure on Circle's reserve-income model.

TD Cowen, however, took a more optimistic view, launching coverage with a Buy rating and an $82 price target. Analyst Bryan Bergin believes that Circle's business is expanding beyond stablecoin issuance into a broader financial infrastructure platform, covering payments, treasury services, tokenized real-world assets, interoperability, and developer services.