Circle Stock Falls as Morgan Stanley Cuts Target to $38

Morgan Stanley downgraded Circle stock days before the company’s second-quarter earnings report.

CRCL fell as much as 6% during the Aug. 3 session before closing 3.5% lower at $60.41. The decline followed Morgan Stanley’s decision to sharply cut its rating and price target.

Circle will report its second-quarter results on Aug. 5. Management scheduled a webcast for 8:00 a.m. Eastern Time to discuss the results and business developments.

Why Did Morgan Stanley Downgrade Circle Stock?

On August 3, Morgan Stanley downgraded the Circle (CRCL) stock to underweight from equal weight. As a result, it has cut its CRCL stock price target from $106 to $38, citing a weaker long-term earnings outlook. This comes just ahead of Circle’s earnings report release this week.

Morgan Stanley analyst James Faucette said the firm expects slower growth in USDC, as declining reserve income and a shift toward lower-margin transaction revenue weigh on profitability.

Morgan Stanley has reduced its USDC supply forecasts by approximately 33% for 2027 and 44% for 2028. It also expects Circle’s GAAP earnings per share to come in about 3% below the Wall Street consensus for 2027, and a massive 20% below the 2028 consensus.

Morgan Stanley also cited increasing competition from tokenized money market funds, tokenized deposits, and the recently introduced Open USD stablecoin model. The bank said these developments could pressure USDC balances, reduce reserve-related revenue, and increase the cost of maintaining distribution incentives, as reported by Yahoo Finance.

Besides, Morgan Stanley also expressed skepticism about Circle’s agentic payments initiative. It noted that the transaction volumes have dropped to around 41,900 transactions per day. Thus, the implied average transaction size has dropped to $0.24, indicating limited commercial adoption.

What Does the CRCL Stock Chart Tell?

While Morgan Stanley has downgraded the Circle stock, some market experts have cited bullish chart patterns in the making. Market analyst Donald Dean said that the CRCL stock is trading within a descending wedge pattern ahead of the company’s August 5 earnings release.

The analyst added that a move above the $62 high-volume price zone could confirm a bullish breakout. If so, the next target would be at $77.

Dean added that if CRCL stock price fails to hold its current structure and breaks lower, $50 would become the next major support level to watch.

Another analyst, ‘Freedom by 40,’ said that the Circle stock is approaching a key technical level. According to him, the stock’s price action is tightening while still showing a corrective pattern.

The analyst noted that CRCL stock has held up relatively well despite the broader market selloff over the past month. He described the resilience as a strong point for both CRCL stock and the overall crypto sector.

Wall Street Remains Divided on Circle Stock

Wall Street analysts remain divided on the outlook for Circle ahead of the firm’s Q2 earnings on August 5. While Morgan Stanley has downgraded the stock, other reports tell a different story.

According to a Yahoo Finance report, TD Cowen analyst Bryan Bergin initiated coverage with a Buy rating and a $82 price target. Similarly, Bernstein analyst Gautam Chhugani maintained an Outperform rating despite lowering his target from $190 to $140.

Meanwhile, Cathie Wood’s ARK Invest continued to increase its exposure to Circle. On July 31, the investment firm purchased 109,129 CRCL shares, valued at approximately $6.7 million, across its ARKK, ARKW, and ARKF funds. This shows continued confidence in the company’s long-term outlook despite the differing views on Wall Street.

Disclaimer: This article provides information only and does not constitute financial or investment advice. Stock prices remain volatile, while analyst ratings and price targets can change. Readers should conduct independent research and assess their financial circumstances before making investment decisions.