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Morgan Stanley cuts Circle to underweight, slashes price target to $38

Morgan Stanley cuts Circle to underweight, slashes price target to $38

Wall Street has lowered targets on Circle as shrinking USDC circulation, rising distribution costs and new reserve-management rivals deepen concerns over the stablecoin issuer’s earnings model.

USDC
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Fact Check
Every element of the claim is confirmed by multiple independent, credible sources. CNBC reports Morgan Stanley downgraded Circle to Underweight, slashing its target from $106 to $38, citing stablecoin utility concerns and reserve income pressure, while TD Cowen turned bullish with a Buy rating and $82 target. Crypto.news and TipRanks corroborate the exact figures ($38 target, Underweight rating by analyst James Faucette) and the reserve income/USDC growth rationale involving tokenized money market funds and deposits.
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Summary

Morgan Stanley downgraded Circle to underweight from equal-weight and cut its price target to $38 from $106, while Mizuho and Bernstein also lowered their targets as Wall Street grows more cautious on the stablecoin issuer’s earnings outlook. Circle shares fell 3.61% to close at $60.35 on August 3 and are down more than 25% this year. The core concern is that Circle’s profit model remains heavily tied to reserve-management income, which accounts for more than 90% of revenue, even as USDC circulation has weakened since the second quarter. RWAxyz said USDC circulation climbed into the $78 billion range at the end of the first quarter before falling about 9% to the $71 billion range in early August, a trend that directly pressures reserve income. Morgan Stanley said Circle’s revenue mix is shifting toward lower-margin transaction fees. Wall Street has also flagged growing competitive pressure from OpenUSD, a stablecoin consortium joined by Visa, Google and BlackRock, as well as from tokenized reserve products such as BlackRock’s money market fund. Analysts also see the Hyperliquid revenue-sharing arrangement with Coinbase as a sign that distribution costs could rise as partners demand larger incentives to support USDC circulation, potentially weighing on Circle’s long-term profitability.

Terms & Concepts
  • stablecoin: A digital token designed to hold a fixed value, often pegged to a fiat currency such as the U.S. dollar.
  • reserve-management income: Revenue earned from managing the assets that back a stablecoin, such as cash and short-term securities.
  • money market fund: A fund that invests in short-term, low-risk instruments and is often used as a cash-management product.