Morgan Stanley Turns Bearish on Circle Stock, Cuts Target From $106 to $38

Circle stock came under pressure on Monday after Morgan Stanley issued a bearish call on the stablecoin issuer just ahead of its earnings report.

The investment bank downgraded the shares to “Underweight” and slashed its price target by 64%, cutting it from $106 to $38. The downgrade comes just days before the company is expected to report its second-quarter results on August 5.

Morgan Stanley Downgrades $CRCL to Underweight from Equalweight, Lowers PT to $38 from $106

Analyst comments: “We downgrade Circle,c as USDC contraction exposes reserve income sensitivity and points to a lower-margin shift toward transaction revenue. We cut our USDC assumptions… pic.twitter.com/cbDhIVAl3k

— Wall St Engine (@wallstengine) August 3, 2026

Circle stock faces pressure as analysts cut expectations

Morgan Stanley attributed their bearishness to a couple of reasons. They pointed to the slowing USDC adoption, weaker reserve income prospects, and what it called an expensive valuation for the company.

Analyst James Faucette said the stalling growth of the stablecoin in circulation could dampen Circle’s biggest sources of revenue.  The bank noted that USDC has yet to expand beyond areas like remittances and stablecoin-linked card payments.

“Utility beyond remittances and stablecoin-linked card spending has yet to gain meaningful traction,” he stated. “We downgrade Circle, as USDC contraction exposes reserve income sensitivity and points to a lower-margin shift toward transaction revenue.”

As a result of this,  Morgan Stanley lowered its forecasts for USDC supply by 33% for 2027 and 44% for 2028. It also reduced its earnings estimates. The bank put its 2027 forecast about 3% below Wall Street expectations and its 2028 estimate 20% lower than the general consensus.

The stock reacted to the news, extending its decline that plagued the asset for weeks despite positive developments for the firm.

 

Last week, Circle said that it had received a limited-purpose trust charter from the New York Department of Financial Services. The license would allow Circle New York Trust to oversee USDC reserves and provide digital asset custody services for institutional clients.

However, investors appeared more focused on slowing growth than on the regulatory milestone. 

Morgan Stanley’s decision comes after other Wall Street analysts have also lowered their expectations for Circle. Last week, Bernstein reduced its price target from $190 to $140, although they still maintain an Outperform rating rating.

Bernstein noted that USDC supply ended the second quarter at around $73 billion, down from $77 billion during the first quarter. The firm then lowered its USDC supply forecast from $290 billion to $170 billion by 2028.

Meanwhile, Mizuho downgraded CRCL to underperform, slashing their price target from $85 to $50.

Competition in stablecoins continues to grow

The stablecoin market has seen new projects emerge in recent months. Morgan Stanley said projects like Open USD could make it expensive for Circle to maintain its partnerships that help with the adoption of USDC.

The bank also highlighted the popularity of tokenized money market funds and tokenized bank deposits as a better way for investors to hold digital dollars.

JPMorgan also shared similar opinions. The bank said that the firm’s revised agreement with Hyperliquid could affect the economics of USDC distribution. They shared that the competition with Circle and Coinbase to expand USDC adoption could reduce profitability for the companies.

Not all experts are bearish

Despite the overwhelming majority of experts being bearish about the stock, some still see an upside. TD Cowen gave the stock a Buy rating and an $82 price target. The firm said investors may be paying a lot of attention to reserve income without looking at its other potential.

They said its digital payments, treasury services, and tokenized assets, among others, could take larger parts of Circle’s business over time.

In the first quarter of 2026, the company reported earnings of $0.21 per share, beating analyst estimates of $0.19. However, revenue came in at $694.13 million, below the expected $714.70 million.

Wall Street is now expecting second-quarter earnings of $0.16 per share on revenue of $713.7 million.

Source:: Morgan Stanley Turns Bearish on Circle Stock, Cuts Target From $106 to $38