JPMorgan Sees Circle Stock Doubling Despite Weaker Margins

Circle Internet Group Inc. (NYSE:CRCL) is set to report its second-quarter earnings, and JPMorgan expects the company's stock to double despite a recent revision in estimates.

The bank trimmed its earnings estimate for Circle by one cent to 15 cents per share, citing Coinbase Global Inc.'s (NASDAQ:COIN) earnings release as a factor. The analyst believes that the market is overlooking Circle's longer-term growth story, particularly in its core stablecoin business.

JPMorgan expects Circle's reserve-linked distribution costs to rise significantly in the second quarter, pushing total distribution and transaction costs to around $426 million. As a result, the bank forecasts Circle's reserve-linked distribution contribution margin to fall to 39% from 42% in the first quarter.

However, JPMorgan sees encouraging signs beneath the surface of Coinbase's earnings. The bank estimates that Circle held approximately $15 billion of on-platform USDC (CRYPTO:$USDC), up from its earlier forecast of $13.6 billion. This suggests that Circle is gaining traction in stablecoin trading and decentralized finance activity.

JPMorgan analyst Kenneth Worthington maintained an Overweight rating on Circle with a price target of $120, implying nearly 100% upside from Monday's close of $60.35. The bank left its longer-term forecasts largely unchanged ahead of earnings, leaving investors to wonder whether shrinking margins are a temporary consequence of investing in USDC's growth or a sign of a more structural squeeze on Circle's economics.