Circle slides after Morgan Stanley downgrade, cut in price target
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- Morgan Stanley downgraded Circle to underweight from equal-weight and cut its price target to $38 from $106, roughly a 64% reduction.
- Circle (CRCL) slid 6% on the report and is down about 30% year-to-date, reflecting growing investor concern over USDC's outlook.
- Morgan Stanley slashed its USDC supply forecasts by ~33% for 2027 and ~44% for 2028, leaving its 2028 GAAP EPS estimate ~20% below Wall Street consensus.
- Open USD — a new stablecoin model with shared governance and reserve economics — could make it more expensive for Circle to maintain USDC distribution incentives, the bank warned.
- BlackRock debuted two blockchain-based money market products the same day, adding to tokenized-cash competition that Morgan Stanley says could erode USDC balances and reserve revenue.
- Circle's agentic payments push drew skepticism, with transaction volume at about $41,900 per day and an implied average transaction size of roughly 24 cents.
- JPMorgan had previously downgraded Circle, citing its revised Hyperliquid agreement and a "prisoner's dilemma" between Circle and Coinbase (COIN) over distribution versus profitability.
Why it matters: Circle's revenue model faces a structural squeeze from three converging pressures: slower USDC growth cutting reserve income, competition from tokenized money market funds and Open USD compressing margins, and a shift toward lower-margin transaction revenue. Morgan Stanley's 2028 EPS estimate now sits 20% below Wall Street consensus, signaling the sell-side is catching down to what the stock's 30% year-to-date decline already suggested.
