Morgan Stanley Slashes Circle Price Target to $38 Amid USDC Circulation Worries

Morgan Stanley has taken a bearish stance on Circle, downgrading its investment rating to underweight and slashing its price target from $106 to $38. According to Morgan Stanley analyst James Faucette, Circle's business mix is shifting away from reserve interest income toward transaction fees, which carry lower profitability.

Faucette also noted that a decline in USDC circulation could significantly weaken Circle's reserve income. In fact, Morgan Stanley lowered its USDC circulation forecast by about 33% for 2027 and about 44% for 2028.

The bank also projected GAAP earnings per share at roughly 3% and 20% below market expectations for those years. Tokenized money-market funds and bank deposit products could pressure USDC demand and Circle's revenue-sharing rate, according to Morgan Stanley.