Morgan Stanley cuts Circle's target price from $106 to $38.

Morgan Stanley has downgraded Circle (CRCL)’s stock rating from “Hold” to “Underweight” and slashed its price target for the firm from $106 to $38. Morgan Stanley analyst James Faucette noted the downgrade is primarily driven by the contraction in USDC circulation, which exposed the sensitivity of Circle’s reserve income and revealed the company’s business is shifting to a transaction revenue model with lower profit margins. The report added that Morgan Stanley has cut its USDC size forecasts for Circle by roughly 33% and 44% for 2027 and 2028 respectively, and projects the firm’s GAAP earnings per share will be about 3% and 20% below market consensus. The analyst pointed out that tokenized money market funds and bank deposit products may exert pressure on USDC balances and revenue sharing ratios, while Circle’s USYC product has a relatively weak economic model. Additionally, the agency payment business remains small in scale, with daily trading volume falling to around $41,900, implying an average transaction value of roughly $0.24. Morgan Stanley further stated that Open USD, which uses a shared governance and reserve revenue model, may raise Circle’s costs for maintaining USDC distribution channels.