Circle Internet (CRCL) stock plunged more than 8% on Tuesday after Compass Point downgraded its rating on the issuer of the USDC stablecoin to Sell from Hold. This marks the first rating downgrade for CRCL stock since its initial public offering (IPO) in June. CRCL stock has jumped about 540% to $198.31 from its IPO price of $31, mainly due to the optimism around the GENIUS Act, which regulates stablecoins. Compass Point turned bearish on CRCL stock, citing various reasons, including rising competition and elevated valuation.
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Despite the passing of the GENIUS Act, Compass Point doesn’t see upside potential in CRCL stock, given the tendency of crypto investors to generally “sell the news” following highly anticipated events. Compass Point expects CRCL stock to “retrace some of its recent rally.”
Compass Point Turns Bearish on CRCL Stock
Compass Point analyst Ed Engel downgraded Circle Internet stock and lowered the price target from $205 to $130. The analyst explained that CRCL’s current market capitalization implies expectations of about a 25% market share and 30% EBITDA margins in the long term. His lower price target is based on the expectation of a 15% long-term market share and 20% EBITDA margins. The revised margin estimate reflects a 60x multiple on 2026 estimated EBITDA compared to the current 106x.
While Engel continues to believe that USDC can be an integral part of the financial system, he is more cautious about CRCL’s long-term economics compared to what its $53 billion valuation suggests.
The analyst expects Circle Internet to expand its distribution network while sharing a greater percentage of interest income. Notably, Coinbase Global (COIN) receives 50% of the revenue generated from the interest income on CRCL’s USDC reserves. Meanwhile, Engel expects Circle Internet to face intense rivalry, as traditional banks and fintechs announce competing stablecoin products, encouraged by the passing of the GENIUS Act. Engel cautioned that these factors in the second half of 2025 could push investors to re-evaluate their long-term EBITDA margin and market share expectations, which will put pressure on CRCL stock’s premium valuation.
What Is the Target Price of CRCL Stock?
Currently, Wall Street is cautious about Circle Internet stock, with a Hold consensus rating based on five Buys, five Holds, and four Sell recommendations. The average CRCL stock price target of $181.50 indicates a possible downside of 8.5% from current levels.
