Circle Internet Group is riding an enormous wave of momentum.
Shares of the stablecoin company—it issues USD Coin, which is pegged to the U.S. dollar—have more than quintupled since their initial public offering in June. The passage of the Genius Act in Washington, which provides more regulatory clarity for stablecoins, creates the potential for more gains.
But first, Circle faces a market test: its first earnings report as a public company. Circle, which has a partnership with crypto investing leader Coinbase, will report its results for the second quarter on Tuesday morning. Analysts are forecasting revenue of $646 million, up 50% from a year ago.
The company is likely to report a net loss for the second quarter but report earnings before interest, taxes, depreciation, and amortization of $119 million. Circle, which generates much of its revenue from net interest income earned on the dollar reserves that back USDC, is expected to post a profit in the third and fourth quarters of the year.
While Circle is clearly benefiting from the enthusiasm surrounding cryptocurrencies in general, Wall Street is split on where the stock will go next. Seven of the 16 analysts who cover Circle have it rated a Buy and the consensus target price on the stock is about $189, about 17% above Monday’s closing price of $161.39
But there are five Hold recommendations. Four analysts even have Circle rated as a Sell.
Dan Dolev, of Mizuho Securities USA, whose $85 price target is the second-lowest for the stock, said in a recent report that the passage of the Genius Act could actually be a negative for Circle.
Dolev thinks the company, which currently only faces significant stablecoin competition from larger rival Tether, could soon find itself also going toe to toe with larger fintech firms and retailers such as PayPal, Walmart, and Amazon.com, who may all want a piece of the stablecoin pie. Banks and other financial services firms could enter the fray too.
“The advancement of the Genius Act could be the catalyst that brings competing stablecoins to the market,” he wrote. “While a boon to the industry, this makes for a shallower moat for [Circle].”
Ed Engel of Compass Point Research & Trading, who also has a Sell on Circle and a price target of $130, added that even though he thinks Circle will wind up beating estimates for the second quarter, investors should be worried about the possibility of weaker gross profit margins over the long term. Another concern, he said, is the stock’s high valuation of nearly 80 times estimated 2026 Ebitda.
On the opposite end of the spectrum, Jeff Cantwell of Seaport Research Partners has a Buy rating on Circle and a $280 price target. That’s the second-highest on Wall Streeet. Cantwell disagrees with Mizuho’s Dolev and isn’t worried about more competition, citing Circle’s “first-mover advantage.”
“The U.S. government is increasingly embracing crypto, and it is positive for the industry overall as participants are gaining much-needed regulatory clarity,” he wrote. The Genius Act is “a watershed moment that will eventually unlock a substantial amount of new opportunity for stablecoins.” That is great news for Circle because it “is the purest stablecoin play in the public markets right now,” Cantwell said.
Oppenheimer’s Owen Lau is bullish on Circle too, writing in a report that the company is “a ‘clean’ way to get exposure to blockchain disruption in money market funds, real estate, consumer payments, and capital markets.”
That may be true. But the average investor probably should be cautious. Even though Circle has tumbled from its post-IPO high of nearly $300 a share, there are enough concerns about growing competition and volatility in the crypto world writ large to give many analysts pause.
Don’t forget that Wall Street typically is very bullish on newly public companies. The fact that the sell-side has turned so quickly on Circle after its IPO is a warning sign.
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