Circle shares fall after Morgan Stanley downgrade

Circle Internet Group shares fell more than 5% in pre-market trading after Morgan Stanley analyst James Faucette downgraded the stock from Equalweight to Underweight and slashed its price target at the same time — from $106 down to $38.

The reasoning centers on Circle's revenue structure: the analyst points to contracting USDC supply exposing the company's heavy dependence on reserve interest income, plus a gradual shift toward lower-margin transaction revenue. Morgan Stanley cut its USDC volume assumptions by roughly 33% for 2027 and 44% for 2028, pushing GAAP EPS estimates about 3% and 20% below consensus, respectively.

“Contraction in USDC supply is exposing the company's heavy dependence on reserve income.”

— James Faucette, James Faucette, Morgan Stanley analyst

• Price target cut from $106 to $38 — a drop of nearly two-thirds
• USDC volume assumptions cut by roughly 33% for 2027 and 44% for 2028
• Tokenized money market funds and deposits, in the analyst's view, threaten both USDC balances and Circle's take rate
• The downgrade landed just two days before Circle's second-quarter 2026 earnings report, due August 5

Morgan Stanley's call diverged sharply from another bank on the very same day: TD Cowen initiated coverage on Circle with a Buy rating and an $82 target, projecting USDC circulation growing at roughly a 31% compound annual rate through 2030. The split reflects a broader debate around the company — we already covered how Circle's own partners in the Open USD consortium turned into competitors on the stablecoin market, which feeds directly into the same competition and margin concerns Morgan Stanley is now citing.

A sharp split just two days before earnings is a rare case of the market getting such polarized signals from major banks almost simultaneously — which side Circle's actual numbers end up confirming will become clear on August 5.

None of this should be read as personalized investment advice.