Compass Point Calls Circle Overvalued, Cuts Price Target After Stablecoin Legislation Threatens Profit Outlook
Circle Internet Group Inc. (NYSE:CRCL) has seen its stock rating downgraded by Compass Point from Neutral to Sell. The company’s price target has also been significantly reduced from $216.10 to $130.
What Happened: The downgrade comes in the wake of the latest U.S. stablecoin legislation, which has prompted Compass Point to re-evaluate Circle’s long-term economic prospects to its current $53 billion valuation, as reported by Investing.com on Monday.
While the firm still acknowledges the potential of Circle’s USDC stablecoin in the financial system, it has become more cautious about the company’s future economics.
Compass Point expects Circle to grow its distribution network shortly, a move that could put pressure on the company's profitability.
The firm also anticipates that traditional banks and fintech firms will launch rival stablecoin products in the second half of 2025, potentially challenging Circle's long-term EBITDA margins and market share.
See Also: Trader Who Called Bitcoin, Ethereum, Solana Bottom In April Now Warns Local Top Likely In August
Why It Matters: Last week, Citigroup Inc. (NYSE:C) initiated coverage on Circle with a Buy rating, highlighting the company's strong potential to lead stablecoin adoption.
During the same week, Jeremy Allaire, CEO of Circle Internet Group, highlighted that stablecoins, such as Circle’s USDC, are rapidly gaining traction as a preferred medium for both retail and institutional transactions.
Circle also become a highly polarizing stock following its blockbuster IPO, with analysts deeply divided on its outlook. Bearish analysts point to overvaluation, flat USDC supply, shrinking margins, and regulatory risks
Price Action: Circle closed Monday at $216.10, marking a 3.43% decline, and slipped a further 1.81% in pre-market trading, according to Benzinga Pro data.
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