PANews reported on August 14, according to The Block, that stock researchers at Mizuho Securities indicated that Circle's stock faces mid-term risks including slower-than-expected USDC growth, rising distribution costs, and the possibility of interest rate cuts by the Federal Reserve. Analysts predict a benchmark stock price of $84 for CRCL, while pessimistic forecasts suggest that by 2027 the stock price could ultimately be $40, below the closing price of $153.16 the day after the company released its quarterly financial report. Notably, Bernstein analysts maintain a target price of $230 for the stock.
Analysts believe that the unexpectedly poor performance of the stock may be attributed to three reasons:
First, the gap between the 'dream' and 'reality' of USDC's issuance is widening. Despite a 6% growth in the stablecoin's quarterly performance so far, fueled by increasing interest in cryptocurrencies, this still falls short of the company's long-term compounded annual growth rate expectation of 40%.
Moreover, with the continuous increase in issuance costs, "rising from 39% of the reserve pool in 2022 to 61% in 2024... reaching as high as 64% in the second quarter," analysts pointed out that Circle's profit margins seem to be further compressed. The introduction of the GENIUS Act could accelerate this process due to heightened competition. Currently, several large institutions have expressed their intention to launch or introduce stablecoins, while Circle's biggest competitor, Tether, is planning to return to the U.S. market.
Finally, analysts stated, "The cooling of the CPI is good news for the economy, but bad news for CRCL." The U.S. Department of Labor reported on Tuesday that the Consumer Price Index rose by 2.7% year-on-year in July, slightly below expectations, raising speculation about the Federal Reserve possibly cutting interest rates.
