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Circle Falls 6% as Morgan Stanley Slashes Price Target to $38 From $106

Morgan Stanley cut CRCL to underweight, slashing its target 64% and USDC supply forecasts up to 44% through 2028.

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Circle Falls 6% as Morgan Stanley Slashes Price Target to $38 From $106

Circle Internet Group (CRCL) shares fell about 6% on Monday after Morgan Stanley cut its price target on the stablecoin issuer to $38 from $106 — a 64% reduction — and downgraded the stock to underweight from equal-weight. The stock is now down roughly 30% year-to-date, underscoring how quickly Wall Street’s view of USDC’s growth story has soured.

Analyst James Faucette laid out the case for pulling back on Circle in a research note, cutting the bank’s USDC supply forecasts by roughly 33% for 2027 and 44% for 2028. Those revisions feed into GAAP earnings-per-share estimates that now sit about 3% below Wall Street consensus for 2027 and 20% below consensus for 2028.

Reserve income under pressure

The core of Morgan Stanley’s downgrade is a bet that USDC’s balance growth will slow just as Circle’s revenue mix shifts toward lower-margin transaction fees instead of interest earned on reserves. “We downgrade Circle, as USDC contraction exposes reserve income sensitivity and points to a lower-margin shift toward transaction revenue,” Faucette wrote.

Reserve income — largely interest earned on the Treasury bills and cash backing USDC — has historically been Circle’s biggest profit driver. If USDC supply growth cools, that income stream shrinks even as Circle leans more heavily on transaction volume that carries thinner margins.

Tokenized cash products squeeze the reserve business

Morgan Stanley pointed to rising competition from tokenized money market funds and tokenized deposits as a direct threat to both USDC balances and the reserve revenue Circle earns on them. That warning landed the same day BlackRock expanded its own tokenized-finance lineup with two new blockchain-based money market products aimed at traditional investors and the stablecoin industry.

Those products join a growing roster of tokenized cash vehicles from firms including Morgan Stanley itself, State Street and Fidelity — all competing for the same institutional dollars that might otherwise sit in stablecoin reserves.

Agentic payments fall short of the hype

Morgan Stanley also questioned Circle’s bet on agentic, machine-to-machine payments as a future growth driver. The bank estimates daily transaction volume for that use case at roughly $41,900, with an implied average transaction size of about 24 cents — figures far too small to move the needle on near-term earnings.

For CRCL holders, the read-through is straightforward: the market is pricing in a slower USDC growth curve and a margin mix that favors fee-based transaction revenue over interest income. With the stock already off roughly 30% this year, the size of Morgan Stanley’s target cut signals how far sentiment has shifted since Circle’s public listing, and how directly tokenized cash competitors are now factored into the stablecoin issuer’s earnings math.