Morgan Stanley cut Circle’s stock rating and gutted its price target, saying slower-than-expected USDC growth and rising competition threaten the company’s core earnings model. What happened - Morgan Stanley lowered its rating on Circle Internet Group to Underweight (from Equal Weight) and slashed its price target to $38 from $106, citing weaker long-term USDC assumptions and pressure on reserve income. - The note pushed Circle shares down roughly 6% in premarket trading to about $58.81. (At the same time, TD Cowen started coverage with a Buy and an $82 target.) Why Morgan Stanley is bearish - The firm trimmed its USDC circulation forecasts by roughly 33% for 2027 and 44% for 2028, saying USDC hasn’t expanded as quickly as expected since Q3 last year. - GAAP EPS estimates were cut to about 3% below consensus for 2027 and roughly 20% below consensus for 2028. - Analyst James Faucette argues Circle’s reserve-income business is increasingly vulnerable because tokenized money-market funds and tokenized deposits could pull capital away from USDC. He also says Circle’s tokenized money market product (USYC) has structurally weaker economics than traditional reserve income. - Morgan Stanley flagged Circle’s OpenUSD initiative as adding shared governance and reserve economics that raise the cost of USDC distribution. The firm also noted “agentic” payment activity remains tiny—about $41,900 in daily volume, implying an average transaction of roughly $0.24—so it’s not a meaningful revenue driver. - Drawing on McKinsey data, Morgan Stanley pointed out that while stablecoins handled roughly $35 trillion in adjusted volume in 2025, only about $390 billion looked like identifiable real-world payments; the bulk of activity is still crypto trading and transfers. Payment use cases that do show traction—cross-border business transactions, remittances, and stablecoin-linked card spending—haven’t yet produced durable balances and repeat transaction economics to shore up reserve income. Bullish counterpoint - TD Cowen’s initiation is more optimistic. Analyst Bryan Bergin argues Circle is building broader financial infrastructure—payments, treasury services, tokenized real-world assets, interoperability and developer tools—that could diversify revenue beyond USDC issuance and capture institutional adoption of stablecoins. - The Street remains split: of 30 analysts tracked by LSEG, 16 rate Circle Hold or Sell, while 14 rate it Buy or Strong Buy. Regulatory backdrop and market context - Just days before the downgrade, Circle secured a NYDFS limited-purpose trust charter for Circle New York Trust, complementing an earlier OCC federal trust bank authorization for Circle National Trust. Circle says USDC issuance will continue through its New York trust before a gradual transition under the approved federal structure. - CEO Jeremy Allaire highlighted the regulatory clarity offered by the NYDFS framework; Circle was also an early BitLicense recipient in 2015. - Regulatory wins haven’t produced sustained share support—Circle shares fell 2.54% on July 31 even as ARK Invest bought 109,129 shares that day ahead of Circle’s Q2 earnings release scheduled for Aug. 5. Bottom line — what to watch - USDC circulation and transaction activity: Morgan Stanley’s cuts assume significantly slower growth; any rebound or further slowdown will be material. - Reserve-income trends: competition from tokenized cash products and how well Circle monetizes OpenUSD and agentic payments. - Revenue diversification: progress in payments, treasury services, tokenized RWA and developer tools could validate TD Cowen’s thesis. - Regulatory clarity: the proposed Clarity Act and Circle’s evolving trust structure will shape institutional adoption and product expansion. In short, Morgan Stanley’s downgrade underscores investor concern that stablecoin issuance alone may not be enough to sustain Circle’s earnings if capital shifts to competing tokenized cash products—while a competing bull case argues the company is evolving into a broader financial infrastructure play.
Morgan Stanley Cuts Circle Price Target to $38, Citing USDC Growth Slowdown
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Summary
Morgan Stanley cut its price target for Circle to $38 from $106, citing slower USDC growth and rising competition. The firm trimmed USDC forecasts by 33% for 2027 and 44% for 2028, warning tokenized funds could hurt Circle’s income. TD Cowen started coverage with a Buy and $82 target. Circle recently won a NYDFS trust charter, but shares remain under pressure. Altcoins to watch may shift as fear and greed index shows market uncertainty.
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