Since the initial public offering of stablecoin issuer Circle (CRCL), the company’s stock has rallied by a whopping 550%. Wall Street has bought into the story that stablecoins will replace or at least challenge the existing global financial system.
However, the severe rally in CRCL shares has created its own set of doubters.
One of them is Mizuho Securities analyst Dan Dolev, who initiated coverage of CRCL stock with an “Underperform” rating and a price target of $85. This means that Dolev is expecting the stock to correct by almost 60%. Dolev further commented that, “We believe consensus does not fully account for looming interest rate cuts, and also overstates USDC’s medium-term growth potential. We also worry about rising distribution costs.” Dolev believes that analysts’ consensus estimate for 2027 revenue at $4.5 billion is 25% to 30% too high.
Circle’s Financials Reflect a Serious Transformation
Before we dive into the merits of Dolev’s somber stance, let’s have a glance at its financials.
Circle has undergone a significant financial transformation over the past two years, marked by rising revenues and new profitability. In 2022, the company reported total revenues of $772.1 million. By the end of 2024, that figure had grown substantially, reaching $1.7 billion.
The shift was not limited to top-line expansion as the company turned profitable as well. The net loss of $768.8 million recorded in 2022 gave way to a net income of $155.7 million in 2024, a laudable feat that should not be scoffed at, especially for a company in a domain as volatile as cryptocurrency.
A similar shift was observed in operating cash flows. 2022 saw the company generate negative cash flow of $72.7 million. Cut to 2024, and the company posted a positive operating cash flow of $344.6 million. The cash position strengthened accordingly as Circle ended the year with approximately $751 million in cash on hand, a considerable increase from the prior year’s closing balance of around $369 million.
The Bull Case for Circle
While highlighting some of the optimism around Circle, I previously highlighted the growing market for stablecoins, Circle’s partner network of more than 500, and its moves to diversify beyond USDC. These factors create a compelling and exciting case for investing in the company.
Circle’s revenue stream relies heavily on interest income from its reserves, which are fully backed by cash and short-term U.S. Treasury instruments, providing stability. In principle, when more users adopt and transact using USDC, this pushes reserve balances higher, leading to a rise in Circle’s top line.
At the same time, there are external developments that offer support. The momentum behind stablecoins has picked up, especially after the Senate gave its nod to the GENIUS Act, which now awaits approval from the House of Representatives. The bill is viewed as an important step toward providing regulatory clarity in the U.S. for dollar-based stablecoins. Its passage would also establish digital tokens like USDC as valid forms of payment, placing them on similar footing with tools like debit cards or bank transfers. Such legal recognition could push stablecoins into the mainstream, shifting the narrative away from their earlier associations with speculative crypto assets.
Separately, Shopify’s (SHOP) recent partnership with Coinbase (COIN) to integrate the Base protocol introduces USDC into daily transactions across a wide global merchant base. Though Circle was not directly involved in the agreement, it stands to benefit. As the issuer of USDC, Circle gains from any increase in the stablecoin’s real-world relevance. Greater use in commerce adds to the USDC’s credibility and reinforces its value proposition as a practical settlement asset, not just a digital store of value.
Finally, Circle is not just relying on macroeconomic or partnership-led growth. The company has already built technical infrastructure that supports cross-border payments on and off the blockchain. Developing this kind of ecosystem takes significant time and effort, creating a natural moat. Moreover, its long-standing ties with banks, payment processors, and crypto platforms contribute to network effects that are hard to replicate quickly. These relationships deepen Circle’s entrenchment in the broader digital payments ecosystem and may insulate it from new competition as the space evolves.
The Bear Case for Circle
An immediate reason to not invest in Circle stock now is its humongous growth since its IPO. The stock is trading at a forward price-earnings ratio of 160x. This is considerably higher than the sector median of 24.3x.
As I stated above, Circle brings in the bulk of its revenue from interest generated through its reserves. This is both a positive and a negative. These reserves, which grow in parallel with USDC issuance, are composed mainly of short-dated U.S. government securities and cash-like assets. That link between rising USDC supply and interest income creates a dependable revenue base when interest rates are favorable. However, if the Federal Reserve begins to ease monetary policy and reduce rates, Circle’s top line could suffer materially. The company’s exposure to policy shifts of this nature leaves it vulnerable to macroeconomic trends.
Additionally, Circle is not retaining all of what it earns. A significant portion of the interest income is shared with distribution partners like Coinbase. This arrangement is already a drag on margins, and management has suggested that the share given to partners could increase further with the rationale being that Circle is focused on expanding USDC’s adoption. That growth, while valuable, could arrive with diminishing returns. If these payout obligations continue to rise, the company might find itself in a vicious “circle” where higher volumes fail to deliver matching profits, and the expansion of its network weighs on its earnings rather than lifting them.
Finally, competition in the stablecoin space is heating up. Collaborations between blockchain developers and trading platforms have the potential to produce rival offerings with broad reach. For example, PayPal (PYPL) is one company that continues to grow its stablecoin offering.
Analyst Opinions on CRCL Stock
Overall, analysts have attributed a rating of “Moderate Buy” for CRCL stock with a mean target price of $184.36 which has already been surpassed. The high target price of $250 indicates an upside potential of about 25% from current levels.
Out of 13 analysts covering the stock, six have a “Strong Buy” rating, one has a “Mdoerate Buy” rating, four have a “Hold” rating, and two have a “Strong Sell” rating.
