Wall Street Slashes Circle Price Targets Amid Worsening Profit Model Concerns

Wall Street analysts have sharply cut their price targets for Circle, the issuer of the USDC dollar stablecoin, citing concerns over its profit model. Morgan Stanley reduced its target to $38 from $106, a decrease of more than 64%, and downgraded the stock to underweight. Mizuho also lowered its target to $45 from $85, a cut of more than 47%. The changes reflect growing competition in the stablecoin market and declining USDC circulation.

The value of Circle's shares has fallen by over 25% this year, with the company's market capitalization shrinking since the second quarter. As reserve management income accounts for more than 90% of its revenue, a decline in USDC circulation would significantly impact Circle's earnings. The launch of OpenUSD and BlackRock's MMF may further intensify competition and raise distribution costs.

JPMorgan noted that Circle and Coinbase have created a 'prisoner's dilemma' by competing to expand USDC circulation, which could undermine each other's profitability in the long term. As asset managers increasingly turn to reserve management products like MMFs, issuers will face rising costs to secure circulation.