Circle Internet slides after Morgan Stanley downgrade, cut in price target
Circle Internet shares fell 6% following a Morgan Stanley downgrade that cited concerns over slowing USDC growth and shrinking reserve income. Analysts highlighted increased competition from tokenized money market funds and questioned the commercial viability of Circle's new agentic payment initiatives.
Why it matters
The downgrade signals growing institutional skepticism toward the long-term profitability of stablecoin issuers as they face margin compression and intensifying competition from traditional finance giants like BlackRock.
The stock, which slid 6% following the report, has fallen about 30% year-to-date, reflecting growing investor concern over the outlook for USDC, the company’s dollar-backed stablecoin and its largest source of revenue.
Analyst James Faucette said Morgan Stanley expects slower USDC growth as reserve income comes under pressure and Circle shifts toward lower-margin transaction revenue.
"We downgrade Circle, as USDC contraction exposes reserve income sensitivity and points to a lower-margin shift toward transaction revenue," Faucette wrote in a research note.
The bank reduced its USDC supply forecasts by roughly 33% for 2027 and 44% for 2028, resulting in GAAP earnings-per-share estimates that are about 3% below Wall Street consensus in 2027 and 20% below consensus in 2028.
Morgan Stanley also pointed to rising competition from tokenized money market funds and tokenized deposits, which could reduce both USDC balances and the revenue Circle earns on reserves.
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