Morgan Stanley Hits Circle With Drastic New Price Target Amid Crypto Contraction
Stablecoin issuer Circle Internet Group ($CRCL) is trading a few percentage points lower on Monday morning after suffering a ratings downgrade by investment bank Morgan Stanley ($MS).
For Circle, Morgan Stanley analyst James Faucette took the stock down to “Underweight” (sell-equivalent) from “Equal Weight” (hold-equivalent). Faucette also took his target price all the way down to $38 from $106. Faucette’s team wrote that USD coin contraction exposes the company’s reserve income sensitivity and points toward potentially reduced margins.
Additionally, Morgan Stanley cut the firm’s USDC assumptions by 33% in 2027 as well as by 44% for 2028. This drove earnings estimates for Circle 3% and 20% below consensus, respectively. Faucette believes that tokenized money market funds and deposits will threaten both USDC balances and take rates. USDC, for those who do not know, is a fiat-backed stablecoin issued by Circle. USDC aims to maintain a one-to-one peg to the US dollar. Its design and stability rest on several core assumptions about reserves, operations, counterparties and market mechanisms.
Faucette is considered to be a well above average sell-side analyst. He is rated at four stars out of five by TipRanks. Over two years, he can only boast a 3.9% average return, but also a much more impressive 63% success rate. On Friday, Dan Dolev, also a respected sell-side analyst, was assigned CRCL by his firm, Mizuho Securities. Dolev rated CRCL a “Hold,” while taking his firm’s target price down to $45 from $50. Dolev is rated 4.5 stars out of five by TipRanks. He has a 51% success rate over two years while generating an average return of 19.5%.
Earnings
Circle is set to report ahead of the opening bell this Wednesday (August 5). Wall Street is looking for a GAAP EPS of $0.16 on revenue of $713.3 million. Performance like this would compare quite well to the year-ago comparison of -$4.48 but would only be good for year-over-year top-line growth of less than 8.5%. Sales growth for all of 2026 is only projected at something less than 10%.
Investors had been hanging their hat on projected revenue growth of roughly 32% for full year 2027. That said, we can see that Wall Street is starting to show a lot less confidence in this name and in its future. It’s not just the two analysts mentioned above. Of the 16 analysts that I know who cover this stock, five have reduced their estimates for the quarter to be reported since its start. Just one has increased the numbers, while 10 have not revised their projections at all.
The Chart
Readers will see that from early March into early June, CRCL developed and completed a double-top pattern of bearish reversal that worked to near perfection. The pattern had an $84 downside pivot that ultimately produced a low with a $58 handle. In doing so, the stock surrendered its 50-day and 200-day SMAs as well as its 21-day EMA. This turned both professional managers and swing traders against the name.
The 21-day line acted as resistance as recently as July 10, and again on July 22 and 23, indicating that maybe the swing crowd is still bearish. Readers will now note that the double top has morphed into a descending triangle, which is a pattern of bearish continuance. Relative strength is weak-ish, while the stock’s daily MACD is looking a little better. Within that indicator, the histogram of the nine-day EMA (blue field) has gone positive. In addition, both the 12-day EMA and 26-day EMA are running in negative territory, which is bearish, but the 12-day line has crossed above the 26-day line. That’s often one of the first signals of a changed environment.
There is definitely a chance that CRCL is trying to bottom ahead of earnings. There is also a chance that the stock goes considerably lower. The downside pivot for triangle is right here ($59). That would put a target for a short seller right around $49. I’d rather go out three weeks and write August 21 $50 puts for $1.60 each than take an equity stake ahead of this report.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
