Mizuho expects Circle shares to fall 58%. Why does he think the stock is overvalued?
That said, Mizuho's forecast isn't even the worst on Wall Street for USDC's stablecoin issuer securities
Shares of Circle Internet, which issues the USDC stablecoin, have soared too high since its IPO in June, Mizuho analyst Dan Dolev said. He gave the company's securities a rating for the first time - and immediately advised selling. And his target price was 58% below the current price. Investors made a frenzy around Circle shares because of hopes of legalizing stablecoins in the United States. But Wall Street is overly optimistic about the company, Dolev believes.
Details
Dan Dolev initiated coverage on shares of Circle and gave them an Underperform rating with a $85 target price, reported MarketWatch. Mizuho's target is 58% below its July 9 close of $200.68. Dolev was the third analyst out of 15 surveyed to be pessimistic on the stock, according FactSet.
"We believe [Wall Street] consensus expectations do not fully account for the looming interest rate cuts, and overstate the USDC's medium-term growth potential. We are also concerned about the rising costs of [stablecoin] distribution," Dolev says.
Mizuho estimates that Circle's consensus revenue forecast of $4.5 billion for 2027 is too optimistic. Given that bomost of the benefit from USDC distribution is taken by Circle's partners, including the exchange Coinbase, a 30% growth rate in stablecoin turnover from the second quarter of 2025 to the end of 2027 would be "healthy." That means revenue of about $3.3 billion in 2027 would be "more realistic," Dolev said confidently.
Another threat is competition. The passage of the Genius Act in the U.S., a law introducing a regulatory framework for steblecoins, could be a catalyst for the launch of new tokens tied to real currencies and other assets, Mizuho warned. Already, PayPal is actively promoting its PYUSD, and Amazon and Walmart are also considering issuing their own stablecoins, MarketWatch noted.
What are other analysts saying?
- According to FactSet, the most negative outlook on Circle shares was given by JPMorgan. Analyst Kenneth Worthington in a June 30 note predicted their fall to $80 and advised investors to sell the securities. At the same time, JPMorgan was underwriting Circle's IPO.
The company, despite its clear leadership in the segment of regulated stablecoins and a strong management team, according to analysts JPMorgan was overvalued: the current capitalization of $46.6 billion is much higher than the value of $8 billion at the IPO. Such a jump, according to the investment bank, reflects excessive investor optimism and does not take into account either the upcoming normalization of interest rates or a possible slowdown in the growth of USDC turnover.
- Deutsche Bank on June 30 began coverage of Circle and assigned a Hold rating with a $155 target price: that's down 23% from the July 9 closing price. The analysts noted that despite the potentially strong long-term growth trend of the stablecoin industry, the company's valuation already reflects future opportunities, and the range of possible outcomes is wide and has the potential to cause significant earnings and stock volatility over the medium term. Therefore, Deutsche view Circle's stock as highly valued at current levels, but recommend waiting for a more favorable entry point.
At the same time, the investment bank's analysts also noted fundamental growth drivers. The increase in USDC turnover to $1.2 trillion by the end of 2027 and the expansion of the services ecosystem create unique opportunities for Circle to expand, Deutsche Bank believes.
Circle shares had four buy recommendations (Buy and Outperform ratings), three hold recommendations (Hold, Neutral or Perform) and one sell recommendation (Underweight), according to June 30 data reported by Reuters.
This article was AI-translated and verified by a human editor
