Circle Stock Falls After Morgan Stanley Slashes Price Target to $38

Shares of Circle Internet Group (CRCL) declined more than 5.5% in pre-market trading after Morgan Stanley issued a significant downgrade, cutting its rating on the stablecoin issuer to Underweight from Equalweight and slashing its price target to $38 from $106.

Morgan Stanley's Bearish Outlook

The bank's downgrade, described as one of the most aggressive bearish calls on the company since its IPO, centers on the shrinking supply of Circle's USDC stablecoin. Morgan Stanley analysts argued this contraction highlights the company's heavy dependence on income generated from its reserves.

In their note, the analysts disclosed they had reduced their assumptions for USDC circulation by approximately 33% for 2027 and 44% for 2028. This revision led them to lower their GAAP earnings per share (EPS) estimates to between 3% and 20% below the current Wall Street consensus, signaling a significant divergence from prevailing market expectations.

Contrasting Views and Market Headwinds

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The Morgan Stanley report landed in sharp contrast to a new note from TD Cowen, which initiated coverage on Circle with a Buy rating and an $82 price target. TD Cowen projected a much more optimistic scenario, with USDC circulation growing at a roughly 31% compound annual rate through 2030, and pointed to fee-based services as a key growth driver.

However, investors appeared to give far more weight to the bearish call, especially given its timing just two days before Circle's second-quarter earnings release on August 5. The downgrade adds to a series of recent price target reductions from firms including Bernstein, Goldman Sachs, and Mizuho. Sentiment is also being pressured by a more crowded competitive landscape, following the launch of the rival Open USD stablecoin by a consortium of financial firms in late June.

Investor Impact

The sharp stock decline occurred while the broader U.S. equity market posted modest gains, with the S&P 500 up 0.5%, underscoring that the pressure on Circle is driven by company-specific concerns. With a new street-low price target from a major bank and uncertainty ahead of its earnings report, investors appear to be reducing their exposure ahead of what Morgan Stanley now anticipates will be a challenging financial update.