Wall Street analysts on Monday initiated coverage of stablecoin issuer Circle Internet Group with mixed ratings. Circle stock has climbed almost 500% from the company's June 5 initial public offering price of 31, though shares have retreated from a high set on June 20.
Meanwhile, Wall Street analysts are also weighing in on the rise of stablecoins and how the new currencies will impact financial services. Also, stablecoins could bolster demand for U.S. treasuries, analysts say.
On the stock market today, Circle stock rose 3% to 185.75 in morning action. Shares hit a high of 248.88 on June 20. The company launched its IPO on June 5.
Circle issues USDC stablecoin, the second-largest stablecoin, often referred to simply as USDC. USDC represents about 24% of the total stablecoin market cap, trailing only Tether at around 60%, according to data from crypto exchange Kraken.
Circle Stock: Wall Street Ratings Mixed
As of March 31, USDC had $60.1 billion in circulation across 4.9 million wallets.
Stablecoins are crypto tokens intended to hold their value at a certain price point, usually $1, and are backed by another asset.
Needham analyst John Todaro on Monday initiated coverage on Circle stock with a buy rating and a price target of 250.
JPMorgan analyst Kenneth Worthington, though, dished out an underweight rating for CRCL stock.
"We see Circle as well positioned in the nascent stablecoin market, where digital cash use cases are quickly developing," he said in a report. "Circle and USDC have an early-mover advantage in what has been a winner-takes-most market, driving USDC market capitalization to $62 billion. We think highly of the Circle management team and are confident in the outlook for outsized stablecoin and USDC growth. However, we see Circle's current market capitalization elevated."
At Goldman Sachs, analyst James Yaro started coverage with a neutral rating on Circle stock.
"CRCL is a unique asset in the public markets, as the only pure play crypto-native company that has potential upside from expansion into very large existing fiat markets, without the direct price volatility inherent to crypto trading," he said in a report.
Circle Stock: Regulation Key
"CRCL's main product, USDC, is a stablecoin meant to represent the U.S. dollar on blockchain. Currently, USDC's main use case is within the crypto ecosystem, and, to a lesser extent, dollar access (holding U.S. dollar against FX devaluation)."
Yaro added: "Together, pending global stablecoin regulation that should favor adoption of compliant stablecoins like USDC, as well as continued new partnerships should drive continued market share gains. We see new USDC use cases — cross-border payments, other forms of payments, and collateral in fiat trading, although potentially partially offset by take rate compression from: rate cuts and cannibalization of USDC with yield-bearing alternatives over time."
Deutsche Bank analysts Brian Bedell started coverage with a hold rating on Circle stock.
"While we see potential for strong long-term industry adoption of stablecoins, the range of outcomes are very wide and likely to create substantial volatility in earnings revisions and the share price for at least the near-to-intermediate term," he said in a report. "Hence, we see the shares as being fairly valued, albeit within a wide range, but we would wait for better opportunities before starting a position."
At Oppenheimer, analyst Owen Lau initiated coverage of CRCL stock with a perform rating.
"CRCL stock is a 'clean' way to get exposure to blockchain disruption in money market funds, real estate, consumer payments, and capital markets. More important, USDC will be a compliant, global currency for transactions in the on-chain world," he said in a report.
"Our rating is mainly grounded on valuation, given that the stock went from its IPO price of 31 to 180 within four weeks. Instead of chasing this strength, we recommend investors wait for a better entry point. Final passage of stablecoin and market structure bills, earnings, and lock-up expiration could present opportunities."
Stablecoins Shake Up Financial Services
Meanwhile, analysts generally expect stablecoins to shake up financial services.
"Stablecoins represent a programmable, always-available layer on top of money," said Mizuho analyst Dan Dolev in a recent report. "They have the potential to disrupt traditional financial systems. Rather than relying on banks, card networks, or remittance providers, stablecoins allow users to send value directly via blockchain, bypassing intermediaries."
In addition, federal regulations require 1:1 backing of stablecoins with high-quality liquid assets like the U.S. dollar or short-term treasury bills. Policymakers are increasingly prioritizing stablecoin adoption as a strategic lever to bolster demand for U.S. treasuries and reinforce the dollar's role as the world's dominant reserve currency.
Wall Street analysts have been debating how the rise of stablecoins will impact credit card networks such as Visa and Mastercard as well as companies such as PayPal Holdings and Fiserv.
"Merchants and digital wallets are emerging as the clearest beneficiaries to greater stablecoin adoption, while banks and business-to-business/consumer cross-border payment providers face the greatest risks," said Evercore ISI analyst Adam Frisch in a report. "On balance, stablecoins represent both an opportunity and threat to the networks and merchant acquirers, likely providing a mix of new revenue streams while also potentially challenging their positions as transaction intermediaries in some scenarios. If there is any transition from consumer debit to stablecoin, we believe it will be slow and over a longer horizon."
Stablecoins Not Fit For Consumer Payments?
Meanwhile, Goldman Sachs analyst Will Nance harbors doubts on stablecoins amid pressure on Visa stock and Mastercard.
"While the concerns initially focused on the potential for disintermediation of carded payments and Visa and Mastercard in early days, we think the debate appears to be shifting to how stablecoins can facilitate business-to-business payments, remittances, and cross-border payments more broadly, and where stablecoins will be disruptive versus enhancing to existing unit economics," Nance said in a report. "We believe this shift away from consumer payments is consistent with our view that stablecoins lack a clear consumer value proposition to incentivize consumer adoption. We believe that payment companies will still have a big role in distribution, fraud prevention, and regulatory compliance even if we see broader adoption of stablecoin rails."
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
