Morgan Stanley Lowers Circle’s Price Target, Shares Drop

Circle Shares Decline Following Morgan Stanley Downgrade

Circle Internet Group’s stock has taken a hit as Morgan Stanley has downgraded its rating on the company to Underweight from Equal Weight. The firm also slashed its price target to $38 from $106, significantly altering its long-term outlook for USDC growth.

Reasons Behind the Downgrade

The downgrading was driven by revised forecasts for USDC circulation, which Morgan Stanley reduced by approximately 33% for 2027 and 44% for 2028. This slowdown reflects concerns regarding the growth of the stablecoin market and pressure on Circle’s reserve income. Despite the increasing adoption of stablecoins, Morgan Stanley pointed out that real-world stablecoin payments remain limited.

Market Reaction

In response to the downgrade, Circle’s shares fell by about 6% in premarket trading, settling at $58.81. This decline occurred even as TD Cowen initiated coverage on Circle with a Buy rating and a price target of $82, viewing the firm as a way for investors to access institutional adoption in the evolving financial infrastructure.

Concerns Over Reserve Income

Morgan Stanley’s analyst, James Faucette, emphasized that Circle’s reserve income model might face significant competition from tokenized cash products and money market funds. They suggested that innovations like Circle’s USYC, a tokenized money market fund, may produce lower economic benefits than anticipated.

Limited Commercial Adoption

Despite efforts by payment companies like Mastercard and Stripe to embrace stablecoins, commercial adoption has yet to yield substantial transaction volumes. Morgan Stanley provided data indicating that, while stablecoins accounted for approximately $35 trillion in adjusted transaction volume in 2025, only around $390 billion involved real-world payments. Most activities remain tied to cryptocurrency trading rather than commerce.

Contrasting Views from Analysts

While Morgan Stanley expresses caution regarding Circle’s future, TD Cowen presents a more optimistic outlook. Analyst Bryan Bergin outlined that Circle is working on expanding its offerings across payments, treasury services, and tokenized assets, which may diversify their revenue streams over time.

Regulatory Developments

This downgrade comes shortly after Circle secured a limited-purpose trust charter from the New York Department of Financial Services, aiming to enhance its compliance and operational structure. Despite these regulatory advancements, investor sentiment remains cautious, as evidenced by the current market performance of Circle shares.

Conclusion

The contrasting views on Circle reflect uncertainty in the market regarding the company’s ability to adapt as the competitive landscape evolves. Analysts remain divided, with 16 of the 30 covering analysts rating the stock as Hold or Sell, while 14 recommend Buy or Strong Buy.