Overview
Morgan Stanley initiated coverage of Circle Internet Group with an Equalweight rating and set a price target of $66.00. The stock was trading at $63.93 at the time of the report, hovering close to its 52-week low of $61.88 and down nearly 10% over the prior week.
Asset scale and balance-sheet notes
Morgan Stanley's research highlighted that Circle issues USDC, the second-largest stablecoin, which the bank estimates held approximately $70 billion in value as of February 1. Data referenced by the analysts indicates Circle reports more cash than debt on its balance sheet, a structural position that provides some liquidity cushion.
Profitability and unit economics
Despite the size of USDC, Circle's gross profit margins remain narrow. The note cites a reported gross profit margin of 5.28%, a figure that underscores limited margin buffers against revenue variability. Coupled with what the bank describes as a heavily fixed-cost operating structure, that margin profile contributes to an unclear short-term earnings picture if revenue streams fluctuate.
Revenue composition and rate sensitivity
Morgan Stanley flagged that many of Circle's current use cases are still tied predominantly to crypto trading activity. The firm also stressed that the current trajectory of U.S. interest rates represents a meaningful headwind to Circle's interest-based revenue. Taken together, concentration in crypto-linked use cases and sensitivity to rates reduce near-term visibility on top-line stability.
Investor positioning and analyst revisions
The investment bank observed that most investors are likely to await clearer signs on either medium-term rate stability or tangible revenue diversification before increasing exposure. That cautious posture aligns with recent analyst behavior, with four analysts having trimmed their earnings expectations for the upcoming period.
Broader analyst activity and market reaction
Other broker updates referenced alongside Morgan Stanley's initiation include a Mizuho upgrade from Underperform to Neutral with a price target of $77.00, as well as a Compass Point upgrade from Sell to Neutral while reducing its price target to $60.00 from $75.00. Market attention to Circle also rose after news surfaced that the White House planned to convene meetings with banking and cryptocurrency industry executives to discuss stalled crypto legislation, including stablecoin holdings, an event that temporarily supported the stock.
Outlook as framed by the research note
While Morgan Stanley acknowledged the company’s stated ambition to build a new internet financial system as compelling, the firm concluded that the market is unlikely to fully value Circle’s network until there is stronger evidence of adoption and measurable displacement of incumbent financial infrastructure. In the bank’s view, until adoption accelerates and revenue sources broaden, a neutral rating reflects the balance of promise and near-term uncertainty.
Key takeaways
- Morgan Stanley initiated coverage at Equalweight with a $66.00 target; stock traded at $63.93 and was near a 52-week low.
- USDC is sizable at an estimated $70 billion as of February 1, but Circle reports thin gross margins (5.28%) and a cost structure that limits short-term earnings visibility.
- Analysts remain cautious pending clearer signs on rate stability or revenue diversification; four analysts recently lowered earnings expectations.
Contextual notes
The combination of asset scale in the stablecoin market and constraints around profitability and rate sensitivity frames a mixed investment case. Investors and market participants will likely watch closely for developments on regulatory clarity, signs of broader adoption of Circle's network, and any shifts in the company's revenue mix that could improve margin visibility.