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Investing.com -- Circle Internet Group (NYSE:CRCL) stock declined over 3% Tuesday after receiving its first downgrade since its June IPO, with shares that initially priced at $31 now trading above $200.
Compass Point analyst Ed Engel downgraded CRCL from Neutral to Sell with a price target of $130, down from $205, citing concerns about the company’s long-term economics relative to its $53 billion valuation. The downgrade comes after U.S. stablecoin legislation passed last week.
"We still believe USDC can be an integral part of the financial system; however, we’re more cautious towards CRCL’s long-term economics than its $53bn valuation implies," Engel wrote in his note to investors.
The analyst expects Circle to expand its distribution network in coming months while sharing a greater percentage of interest income. He also anticipates traditional banks and fintech companies will announce competing stablecoin products in the second half of 2025, potentially pressuring CRCL’s premium valuation.
According to Engel, CRCL’s current market capitalization implies expectations of approximately 25% market share and 30% EBITDA margins long-term. His reduced price target assumes 15% long-term market share and 20% EBITDA margins, representing a 60x multiple on 2026 estimated EBITDA versus the current 106x.
The analyst also pointed to crypto’s history of "sell the news" events, suggesting CRCL may retrace some of its recent rally following the GENIUS Act being signed into law on July 18.
At least three analysts now rate the stock as a sell, including JP Morgan, which maintains an $80 price target on CRCL.