Morgan Stanley cuts Circle price target to $38, downgrades to underweight
DeFi & Yields ·
The bank slashed its rating on Circle from equal-weight to underweight and reduced its price target from $106 to $38, pointing to a weaker long-term earnings outlook for the stablecoin issuer.
Circle shares fell about 6% following the downgrade, according to a report detailing Morgan Stanley's revised outlook. The move reflects the bank's expectation of slower growth for USDC, Circle's flagship stablecoin, alongside greater pressure on the reserve income that has underpinned much of the company's revenue base.
Morgan Stanley also flagged a structural shift within Circle's business mix, anticipating a move toward lower-margin transaction revenue as reserve income comes under strain. That transition, the bank argued, would weigh on overall profitability even if transaction volumes hold steady.
Competition is a central theme in the downgrade. The bank cited tokenized money market funds, tokenized deposits and Open USD as rivals capable of eroding Circle's economics further, suggesting the stablecoin issuer faces a more crowded field for the same pool of on-chain dollar demand. These alternatives could pull yield-seeking capital and transactional activity away from USDC, compounding the reserve-income pressure already anticipated.
The cluster shows at least two sources covering the same downgrade and the accompanying 6% share decline, indicating the rating change and price-target cut were consistently reported rather than isolated to a single account.
What remains unresolved is how Circle's own guidance or management commentary might respond to Morgan Stanley's thesis, and whether other analysts will follow with similar revisions to USDC growth or margin assumptions. Also unclear is the pace at which tokenized money market funds, tokenized deposits and Open USD might actually capture share from USDC, since the downgrade rests on anticipated competitive pressure rather than reported market-share shifts to date.