Circle Internet Corp. fell 4% in premarket trading on Tuesday.
Mizuho Securities’ top analyst Dan Dolev initiated coverage of Circle Internet stock with a “Sell” rating and $85 price target, implying a significant 59% downside potential from current levels. Dolev’s bearish view on CRCL stems from his belief that the consensus revenue estimate for FY27 is highly optimistic and does not fully account for the potential impact of future interest rate cuts.
Additionally, the analyst stated that the consensus is overestimating the medium-term growth potential of Circle’s USDC stablecoin. Dolev sees a 25% to 30% downside risk to the fiscal 2027 consensus revenue estimate of $4.5 billion. Furthermore, the passage of the GENIUS Act has widened the potential for circulation and adoption of stablecoins, but it has also opened up competition for more companies to enter the market. Circle could face heightened competition from rivals such as PayPal and Ripple (RLUSD), both of which already have their own stablecoins.
Circle Faces Interest Rate and USDC Circulation Headwinds
Dolev noted that the consensus revenue projection for FY27 ($4.5 billion) implies a CAGR (compound annual growth rate) of 30% to 40%. This estimate requires a substantial increase in USDC circulation and/or persistently high interest rates. Meanwhile, Dolev stated that consensus expects about five rate cuts through 2027, and USDC circulation has, in fact, flattened since April. Considering these factors, the analyst projects a 25% to 30% downside revision to the 2027 consensus revenue estimate.
Coinbase Is the Larger Beneficiary
Circle and its partner, Coinbase Global, Inc., are the primary issuers of USDC, currently the world’s second-largest stablecoin. Dolev stated that although Circle mints the stablecoin, the real beneficiary of the partnership is Coinbase due to rising distribution costs. These costs have reduced Circle’s net revenue margin from 61% in 2023 to roughly 39% in Q1FY25. Net revenue margin is defined as reserve income less distribution costs.
Under the terms of the Circle-Coinbase partnership, COIN earns full interest income on USDC held on its platform, which accounts for about 25% of USDC in circulation. Plus, it earns 50% of the income from USDC held outside of Circle and Coinbase’s platforms. The proportion of USDC circulation held on Coinbase’s platform has grown from 8% in 2023 to 22% in 1Q25, driven by the rewards offered on its platform.
What Is the Future of Circle Stock?
Analysts prefer to remain sidelined on Circle Internet stock due to uncertainty about the future of the stablecoin market. On TipRanks, CRCL stock has a Hold consensus rating based on five Buys, five Holds, and two Sell ratings. Also, the average Circle price target of $185.73 implies 10.5% downside potential from current levels.
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