Circle Stock on the Brink: Mizuho Predicts 59% Drop Amid Interest Income Warning
Analysts question Circle’s business model as competition heats up and rates set to fall
Wall Street watchers saw a sharp reaction this week when Mizuho Securities initiated coverage on Circle Internet Group Inc. (ticker CRCL, traded on the NYSE, sector: financial technology / crypto), assigning an Underperform rating and a $85 price target—a potential 59% downside from recent trading levels. Mizuho analyst Dan Dolev highlighted serious concerns over Circle’s reliance on interest income and forecasted that the company’s 2027 revenue could be $3.3 billion, approximately 25–30% below Street consensus of $4.5 billion.
Circle's stock soared nearly 500% post‑IPO, reaching highs near $299, before retreating to about $207 as of July 7. Yet Mizuho flagged that more than 99% of its 2024 revenue came from interest earned on U.S. Treasury reserves backing USDC, the company’s flagship stablecoin. With Federal Reserve rate cuts expected by late 2026, Dolev warns that falling yields could directly erode profitability—Circle has virtually no fee‑based or recurring revenue to cushion the blow.
Distribution economics add to the concern. Circle shares reserve income with partners like Coinbase Global Inc. (COIN), paying over 60% of reserve yields in distribution costs by Q1 2025—up sharply from around 39% in 2022. Those rising costs compress net revenue margins even as growth stalls.
Under the newly passed GENIUS Act, regulatory clarity may attract new stablecoin competitors such as PayPal (PYPL), Amazon (AMZN), and Walmart (WMT) to enter the USDC market. Mizuho fears this intensifying competition could further destabilize Circle’s dominant market position.
Despite these headwinds, some analysts remain bullish. Firms like Needham and Bernstein rate CRCL a “buy” or “outperform”, with price targets ranging from $225 to $250, citing Circle’s regulatory alignment and leadership in stablecoin issuance. Others like Goldman Sachs and Deutsche Bank offer more cautious views, citing valuation volatility and competition risks.
The divide highlights the broader debate: is Circle a pioneering financial disruptor or an overvalued crypto play vulnerable to macro shifts? Mizuho clearly falls in the latter camp, emphasizing that current sentiment may underplay medium-term risks.
For investors, the contrast is stark. Circle’s bullish case relies on continued growth in USDC circulation—yet that number has been flat since April, and transaction network growth fails to convert easily into interest spread without sustainable margins. Mizuho’s assumptions on 30% USDC annual growth to 2027 may be optimistic given rising competition and an evolving regulatory landscape.
As of now, CRCL trades at approximately $207–$208, well above Mizuho’s conservative $85 target. That gap underscores how sentiment, regulation, and macro expectations are driving a polarized valuation picture. Without diversification into fee-based revenue or improved margin control, Circle could struggle as rates decline and growth stalls.
Ultimately, the stock stands at a crossroads. Bulls argue it is the backbone of digital value transfer, enabled by early regulatory compliance and institutional crypto adoption. Bears, led by Mizuho, see a fragile business model with too much concentration in interest income and exposure to rate shifts, rising costs, and commoditization risks. For now, Mizuho’s warning serves as a stark reminder: hype can carry a crypto stock far, but fundamentals must ultimately tell the story.