Stablecoins Are Sizzling, But Analysts Say Circle Stock Has Overheated — Barrons.com

By Paul R. La Monica

Circle Internet Group, the issuer of the USDC stablecoin, is a key beneficiary of the crypto craze since it went public in June. Its stock has already skyrocketed more than 335% from the IPO price.

The GENIUS Act, which provides a regulatory framework for stablecoins, digital currencies pegged to the dollar or other real assets, is a positive catalyst. So is the recent record-setting run for Bitcoin. Circle also just reported better-than-expected revenue for the second quarter, its first earnings release since its June IPO. But despite all of this good news, analysts at two of the lead underwriters for Circle's IPO have soured on the stock.

Goldman Sachs and JPMorgan both have tepid ratings on the stock and price targets that call for around a 35% decline from Circle's current price of about $135. Goldman's James Yaro has a Neutral rating on Circle and a price target of $86, while JPMorgan's Kenneth Worthington has an Underperform on Circle with a price target of $89.

Some of their concerns? Yaro and other fintech analysts at Goldman argued in a report that Circle's valuation "appears elevated." The stock is trading at nearly 90 times 2026 earnings estimates.

The Goldman analysts said that they prefer Robinhood Markets "as it continues to innovate in crypto/stablecoins." The company is one of the backers of the Global Dollar USDG stablecoin. But Robinhood, valued at 60 times earnings forecasts for next year, isn't exactly cheap either.

JPMorgan's Worthington is worried about competition, particularly from Coinbase Global — even though Coinbase is currently a partner of Circle and USDC. Worthington noted that "the highly competitive payments space seems to be breeding frenemies," adding that Circle's new Circle Payments Network will compete with Coinbase's business-to-business offerings.

Circle also competes with Tether, the issuer of the USDT stablecoin. Tether and USDT are larger than Circle, and Tether is looking to grow its clout further in the U.S.

To that end, the company said Tuesday that it had hired Bo Hines, who was recently the executive director of the White House Crypto Council in the Trump administration, to be its new strategic advisor for digital assets and U.S. strategy. Hines was one of the architects of the GENIUS Act.

Circle CEO Jeremy Allaire doesn't seem overly concerned about competition though. He said during the company's earnings conference call last week that "Circle is becoming the default choice for institutions" looking to adopt stablecoins, adding that there has been a "broad adoption of our platform from even the most competitive players."

Allaire also said that the passage of the GENIUS Act "will accelerate stablecoin adoption by major financial institutions, mainstream enterprises, technology companies, and ultimately, drive much broader use of stablecoins across retail and wholesale payments." In other words, the stablecoin pie will get bigger.

Circle could, however, face even more competition from Tether going forward. That's one of the reasons why Wall Street is so divided on Circle's near-term prospects.

Four analysts, including Worthington, have a Sell-equivalent rating on the stock while six more have Circle rated a Hold. Just six analysts recommend Circle as a Buy.

The tepid reaction from some other analysts haven't helped Circle. Even though shares are still up sharply from the IPO price, there are some investors who bought Circle in the post-IPO trading frenzy that are sitting on big losses. Circle's stock peaked at a price of just under $299 on June 23. It has plunged 55% since then.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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