Morgan Stanley Slashes Circle Price Target Amid USDC Growth Concerns

Morgan Stanley cut its price target for Circle to $38 from $106 due to slower growth in USDC circulation and increasing pressure on the company's core revenue model. Analyst James Faucette noted that weaker-than-expected growth in USDC's circulating supply could weigh on the company's reserve income, which remains a key source of revenue.

The bank lowered its USDC supply forecasts by 33% for 2027 and 44% for 2028. As a result, Morgan Stanley's GAAP earnings-per-share estimates are now roughly 3% below Wall Street consensus for 2027 and 20% lower for 2028.

Circle shares fell over 3% following the downgrade, pushing its year-to-date decline to 24%. However, TD Cowen initiated coverage of Circle with a buy rating and an $82 price target, arguing that the market may be placing too much emphasis on Circle's reserve income while overlooking potential growth in areas such as payments, treasury services, tokenized assets, and developer tools.

Morgan Stanley warned of slower USDC growth, stating 'Utility beyond remittances and stablecoin-linked card spending has yet to gain meaningful traction.' The bank also noted that competition surrounding USDC could put additional pressure on Circle. Tokenized money market funds and tokenized bank deposits are gaining traction as alternative ways for investors and institutions to access digital versions of traditional financial assets.