Mizuho Downgrades Circle to Underperform, Target Price Cut to $50

Circle's stock price has fallen over 75% from its peak after last year's IPO. Mizuho Securities analyst Dan Dolev downgraded Circle's rating from Neutral to Underperform this week, setting a target price of $50, which still represents about an 18% downside from Thursday's closing price and is significantly lower than the average analyst target price of $123 reported by Bloomberg. Dolev believes that Circle faces heightened competition in the stablecoin market, with over 100 fintech companies, payment networks, crypto firms, and banks supporting the Open Standard project set to issue OUSD. Circle's stock dropped 7.7% on Thursday, coinciding with Visa's announcement of a stablecoin issuance, transfer, and management platform for financial institutions. Circle primarily generates revenue through the yield on its USDC reserve assets, while new stablecoin initiatives like OUSD share reserve earnings with partners and charge lower management fees. Dolev suggests that such business models may entice partners to leave Circle, exacerbating pricing and margin pressures. He forecasts Circle's adjusted EBITDA for 2027 to be $699 million, below the market consensus estimate of $907 million. He also noted that Circle's USDC distribution agreement with Coinbase will be renegotiated in August, with Coinbase potentially leveraging the competitive pressure from OUSD to negotiate a higher revenue share.

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