Circle (CRCL) stock fell roughly 1% Tuesday as Mizuho analysts gave shares an Underperfom rating, citing growing risks from rising competition and looming interest rate cuts.
The stock has surged more than 500% since Circle’s blockbuster IPO last month, buoyed by optimism around the broader adoption of asset-backed digital tokens. Shares were trading at roughly $204 in midday trading after recovering from a 4% slide premarket.
Mizuho analysts initiated coverage of the stock with a price target of $85.
Circle makes much of its money from interest income — specifically from short-term Treasury bills backing its stablecoin, USDC (USDC-USD). If the Federal Reserve starts cutting interest rates in September, yields on Treasurys are expected to decline.
“We believe consensus does not fully account for looming interest rate cuts, and also overstates USDC’s medium-term growth potential,” Mizuho managing director Dan Dolev and his team said in a research note.
Dolev also flagged rising distribution costs, noting that Circle shares a significant portion of its reserve income with partners like Coinbase (COIN).
Read more about Circle’s stock moves and today’s market action.
Furthermore, the Mizuho team warned that the GENIUS Act — a bill passed last month to establish regulatory guardrails around stablecoins — could act as a catalyst for increased competition, bringing new entrants into the market and potentially shrinking Circle’s market share.
Wall Street remains divided on the stock, with 8 Buy, 6 Hold, and 3 Sell ratings, according to Bloomberg data.
Last month, Jeff Cantwell of Seaport Research Partners initiated coverage of Circle with a Buy rating and a $235 price target, calling it a leading crypto “disruptor” with a “sizeable future opportunity.”
“We think the overall stablecoin ‘market cap’ will reach $500B by the end of next year; longer-term, we think it ultimately can reach $2T,” Cantwell wrote.
Meanwhile, Compass Point analyst Ed Engel recently rated the stock Neutral, with a $205 price target.
“We expect competition to accelerate after stablecoin legislation passes,” Engel wrote. “This influx of competition could reduce long-term market share expectations and pressure CRCL shares in 2025.”
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
