Morgan Stanley Downgrade Hits Circle Internet Stock Amid CLARITY Act Uncertainty

Circle Internet's (CRCL) stock fell more than 5% in pre-market trade on Monday after Morgan Stanley downgraded the company to 'Underweight' from 'Equal Weight', with a price target of $38, implying a potential downside of nearly 40%.

The downgrade came as Bitcoin's price slipped below $63,000 and the Digital Asset Market Clarity Act (CLARITY) remained stalled in Congress. The legislation did not appear on the Senate's agenda for the week, with the chamber scheduled to enter recess on August 10.

TD Cowen initiated coverage of CRCL with a 'Buy' rating and an $82 price target, stating that the company offers a 'compelling combination' of attractive growth and diversification. However, this view is not widely held, as Morgan Stanley's downgrade added to pressure from a broader selloff in crypto equities.

Circle Internet's USDC revenue model faces pressure, according to James Faucette, who warned that the amount of USDC in circulation may not grow as quickly, exposing the company's reserve income sensitivity. He also stated that Circle's tokenized money market fund is 'carrying structurally weaker economics.'