Circle Stock Plunges as Analysts Clash Over Long-Term Prospects

Circle's stock fell sharply in premarket trading after Morgan Stanley downgraded its rating to Underweight from Equal Weight and cut its price target to $38 from $106. This move was made despite TD Cowen initiating coverage with a Buy rating and an $82 price target, highlighting the growing divide on Wall Street over Circle's long-term prospects.

Morgan Stanley cited slower growth in USDC circulation than previously anticipated as the reason for its downgrade. The brokerage reduced its forecasts for USDC circulation in 2027 and 2028 by 33% and 44%, respectively, which challenges Circle's target of achieving average annual growth of 40% across market cycles.

The analysts noted that 'USDC has effectively not grown' since the third quarter of last year. They added that broader adoption has yet to materialize as 'utility beyond remittances and stablecoin-linked card spending has yet to gain meaningful traction.'

TD Cowen, on the other hand, took a more optimistic view, highlighting Circle's diversification into high-margin fee-based revenues and its optionality through Arc. Analyst Bryan Bergin believes that Circle is expanding beyond stablecoin issuance into a broader financial infrastructure platform.