According to Cointelegraph, analysts at JPMorgan, a prominent U.S. investment bank, have initiated coverage of Circle (CRCL) shares with an underweight rating and set a price target of $80 by December 2026. This forecast represents a significant decrease from the current CRCL price of $180, reflecting a 55% drop. The target is based on a 45x multiple of projected 2027 earnings per share (EPS), with an additional $10 premium for potential upside. The analysts, led by Kenneth Worthington, presented their analysis in the "North America Equity Research" report.
JPMorgan's report highlights Circle's strong position in the emerging stablecoin market, attributing this to its early-mover advantage and diverse use cases. However, the analysts expressed concerns about Circle's current market capitalization, which they consider elevated. Circle's valuation stands at $43.8 billion, a significant increase from its initial $8 billion market cap when CRCL shares began trading on the New York Stock Exchange (NYSE) on June 5. The analysts project a market cap of approximately $21 billion by late 2026, noting that the IPO was priced at $31, equating to an $8 billion market cap.
The report also identifies competition as a potential threat to Circle's market value. JPMorgan analysts pointed to the risk posed by both direct stablecoin competitors and other crypto investment products, such as tokenized deposit accounts and digital money market funds. They warned that successful competitors could capture enough market share to reach critical mass, leveraging the network established by Circle. Additionally, the analysts highlighted regulatory risks, particularly concerning U.S. stablecoin regulations that may require issuers like Circle to hold equity capital based on the amount of stablecoins in circulation, similar to Europe's Markets in Crypto-Assets (MiCA) regulation.
Furthermore, the development of central bank digital currencies (CBDCs) presents another challenge for Circle. While the U.S. has adopted a stablecoin-friendly approach to bolster the US dollar's strength, the global adoption of CBDCs, especially in Europe, could hinder Circle's international expansion and impact its long-term growth and profitability. The analysts noted that further global CBDC adoption could adversely affect Circle's ability to scale globally. Circle's shares experienced a 15.5% decline last Friday, following a peak above $290 in mid-June.
