Morgan Stanley Slashes Circle Target to $38 Amid USDC Growth Concerns

Woofun AI reports that Morgan Stanley downgraded Circle Internet (CRCL) to underweight from equal-weight on Monday, slashing the price target to $38 from $106. Analyst James Faucette attributed the move to a deteriorating long-term earnings outlook for USDC, the company’s primary revenue driver.

The stock dropped 6% following the report, extending its year-to-date decline to approximately 30%. Morgan Stanley projects reserve income will face pressure as Circle pivots toward lower-margin transaction revenue. Consequently, the bank reduced USDC supply forecasts by 33% for 2027 and 44% for 2028.

Woofun AI data shows GAAP earnings-per-share estimates now sit 3% below Wall Street consensus in 2027 and 20% below in 2028.

Structurally, competition from tokenized money market funds and tokenized deposits threatens USDC balances. BlackRock expanded into this space on Monday with two blockchain-based money market products targeting traditional investors and the stablecoin industry.

Additionally, the emergence of Open USD, featuring shared governance and reserve economics, may increase costs for Circle to maintain USDC distribution incentives.

Notably, agentic payments showed limited commercial adoption, with daily volume falling to $41,900 and an average transaction size of 24 cents. This weakness follows a JPMorgan downgrade citing a "prisoner's dilemma" between Circle and Coinbase (COIN). JPMorgan argued that Circle’s revised agreement with Hyperliquid weakened USDC economics, forcing both firms to compete on distribution at the expense of profitability.

Circle faces intensifying market pressure from BlackRock, Open USD, JPMorgan, Hyperliquid, and Coinbase. The convergence of these competitive forces suggests significant headwinds for USDC’s growth trajectory. This marks a critical juncture for the stablecoin issuer’s valuation model.