Circle Internet Group stock rating downgraded to Sell by Compass Point

Investing.com - Compass Point has downgraded Circle Internet Group (NYSE:CRCL) from Neutral to Sell, while significantly reducing its price target to $130.00 from $205.00. The company, currently trading at $216.1 with a market capitalization of approximately $51 billion, shows signs of significant overvaluation according to InvestingPro analysis.

The downgrade follows the passage of U.S. stablecoin legislation last week, which has prompted the research firm to reassess Circle’s long-term economic prospects relative to its current $53 billion valuation.

While Compass Point still believes Circle’s USDC stablecoin can be an integral part of the financial system, the firm has grown more cautious about the company’s future economics.

Compass Point expects Circle to expand its distribution network in the coming months while sharing a greater percentage of interest income with partners, potentially impacting profitability.

The research firm also anticipates that traditional banks and fintech companies will announce competing stablecoin products in the second half of 2025, which could force investors to recalibrate expectations for Circle’s long-term EBITDA margins and market share.

In other recent news, Circle Internet Group has been actively pursuing regulatory advancements with its application to establish a national trust bank for its USDC operations. This move, if approved, would allow Circle to manage its USDC Reserve under federal oversight and provide digital asset custody services to institutional customers. Meanwhile, Ripple, a competitor, has also applied for a federal banking license, which has intensified competition in the stablecoin market. Circle’s strategic steps in regulatory compliance come as the U.S. House of Representatives passed a bill to create a regulatory framework for cryptocurrencies, expanding the Commodity Futures Trading Commission’s role in overseeing the digital asset industry.

Citi has initiated coverage on Circle Internet Group with a Buy rating, citing the company’s potential to lead in stablecoin adoption. The firm emphasizes Circle’s technological advantages and legislative momentum as key factors for its positive outlook. In contrast, Deutsche Bank (ETR:DBKGn) has given Circle a Hold rating, pointing to the potential volatility in stablecoin adoption and the impact of macroeconomic conditions on the company’s performance. These developments highlight the dynamic and competitive landscape in which Circle is operating.

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