By Nate Wolf
Circle Internet Group stock has held up well to start 2026 but the stablecoin issuer faces a looming margin crunch, according to analysts at Compass Point.
The firm downgraded Circle stock to Sell from Neutral and trimmed its price target to $77 from $79 in a research note Thursday. While supply of USDC -- the company's flagship dollar-pegged token -- has been resilient in recent months, growth has come from lower-margin areas, Compass Point said.
Circle stock dropped 6.7% to $88.15 on Thursday. Shares had risen 19% in 2026 as of Wednesday's close of trading. The company didn't immediately respond to requests for comment from Barron's.
Just under 80% of USDC supply growth since the start of February has come on the Sky, Binance, and Ethena platforms, which have distribution deals that eat into Circle's cut of interest revenue on USDC reserves, Compass Point noted. Circle claims higher margins on USDC not held on these networks -- known as "off-platform" supply.
That could mean an unpleasant surprise for investors when Circle reports first-quarter earnings in late May or early June.
"CRCL's 1Q results could underwhelm rising expectations," wrote analyst Ed Engel. "Looking into 2Q, USDC across partnership platforms remains above 1Q's average level. Therefore, we expect gross margins to remain under pressure if current trends persist."
That dynamic is a change from previous crypto bear markets, when USDC experienced outflows. This time around, yield-sharing between platforms is more common, which has reduced overall outflows but also cannibalized off-platform holdings, Engel explained.
Compass expects Circle's earnings before interest, taxes, depreciation, and amortization to fall 19% in the first quarter from last quarter. The firm's estimate for fiscal 2027 Ebitda is also 20% below Wall Street's consensus forecast.
A crypto rally would change the outlook for Circle, Compass Point said. While the price of USDC is pegged to the greenback, rather than crypto prices, more activity within the blockchain ecosystem means more stablecoins circulating and held on higher-margin platforms.
Compass Point remains in the minority on Wall Street. Of the 27 analysts polled by FactSet, 48% rate Circle stock the equivalent of a Buy and 44% have it at Hold. The average price target is $131.29.
Write to Nate Wolf at nate.wolf@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 09, 2026 10:44 ET (14:44 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments