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Investing.com -- Wolfe Research initiated coverage of Circle Internet Group with an Underperform rating, warning that the stablecoin issuer faces interest rate and competitive headwinds at a time when expectations for the newly listed company remain elevated.
Circle, which issues the USDC and EURC stablecoins, is the second largest regulated issuer globally and has gained share by building products designed for banks and institutional clients.
USDC’s market cap has doubled over the past year to about $75bn, helping drive more than $2.75bn in expected 2025 revenue, with over 96% tied to interest income.
Wolfe said Circle’s dependence on rates creates a near term drag as the Federal Reserve is expected to cut borrowing costs.
The broker also cited rising distribution incentives paid to partners, which pressure margins, and a widening competitive field that includes Tether’s planned USAT token, tokenized deposit initiatives at global banks and offerings from Paxos and Ripple.
The firm added that international policymakers may push back against the growing use of USD stablecoins in emerging markets, while central banks advance digital currency pilots.
Circle is also investing in newer products including its Arc blockchain and Circle Payments Network. Wolfe said usage remains early and the company is prioritising adoption over revenue, which limits the visibility of longer term contribution.
Wolfe set a $60 year end 2026 price target based on 22 times its 2027 adjusted EBITDA estimate, noting that Circle still trades at a premium to peers despite a decline of about 9% since its June listing.
The broker said the current valuation embeds ambitious expectations for sustained revenue growth above 20%, steady margin expansion and a sharp rise in free cash flow through the next decade.
Risks to the rating include slower share gains by competitors, higher for longer interest rates, easing distribution costs and faster adoption of Circle’s Arc and payments network.