Circle slides after Morgan Stanley downgrade, cut in price target
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- Morgan Stanley downgraded Circle Internet (CRCL) to underweight from equal-weight on Monday and cut its price target to $38 from $106, sending the stock down 6% on the day and leaving it roughly 30% lower year-to-date.
- Analyst James Faucette said USDC contraction exposes reserve income sensitivity and points to a lower-margin shift toward transaction revenue, framing the downgrade around deteriorating mix economics rather than near-term demand alone.
- The bank trimmed USDC supply forecasts by roughly 33% for 2027 and 44% for 2028, leaving its GAAP EPS estimates about 3% below Wall Street consensus in 2027 and 20% below consensus in 2028.
- Morgan Stanley flagged tokenized money market funds, tokenized deposits, and the Open USD stablecoin model — with its shared governance and reserve economics — as structural threats to both USDC balances and reserve revenue.
- The bank was dismissive of Circle's agentic payments push, noting transaction volume had fallen to about $41,900 per day with an implied average transaction size of roughly 24 cents, suggesting limited commercial adoption.
- BlackRock on Monday debuted two blockchain-based money market products aimed at both traditional investors and the stablecoin industry, adding a heavyweight competitor in the tokenized cash space Morgan Stanley says pressures Circle.
- JPMorgan had previously downgraded Circle, arguing its revised agreement with Hyperliquid weakened USDC economics and highlighted a growing "prisoner's dilemma" between Circle and Coinbase over USDC distribution and profitability.
Why it matters: Circle is down roughly 30% year-to-date, and Morgan Stanley's EPS estimates now sit 20% below consensus by 2028. The bank argues tokenized cash products and the Open USD stablecoin model will erode USDC's revenue base, pushing Circle's mix toward lower-margin transaction revenue — and putting Circle's profitability split with Coinbase directly under scrutiny.
