Morgan Stanley downgrades Circle to underweight, slashes price target from $106 to $38

Morgan Stanley downgraded Circle (CRCL) to underweight and slashed its price target to $38 from $106, causing the stock to slide 6%. The bank cited a weaker earnings outlook, cutting USDC supply forecasts by up to 44% for 2028. Analysts pointed to rising competition from tokenized products by firms like BlackRock and challenging distribution economics for Circle's USDC stablecoin.

Morgan Stanley downgrade

• ▪Morgan Stanley downgraded Circle Internet (CRCL) to underweight from equal-weight on August 3, 2026.
• ▪Following the report, Circle's stock (CRCL) slid 6% and has fallen about 30% year-to-date.
• ▪Morgan Stanley cut its price target for Circle Internet (CRCL) to $38 from $106, citing a weaker long-term earnings outlook.

USDC supply forecasts

• ▪The bank's revised forecasts result in GAAP EPS estimates 3% below Wall Street consensus for 2027 and 20% below for 2028.
• ▪Morgan Stanley reduced its USDC supply forecasts by roughly 33% for 2027 and 44% for 2028.

Competitive pressures

• ▪The introduction of Open USD, a stablecoin with shared governance and reserve economics, is increasing market competition.
• ▪On August 3, 2026, BlackRock launched two blockchain-based money market products.
• ▪Circle faces rising competition from tokenized money market funds and tokenized deposits, which could reduce USDC balances and reserve revenue.

Agentic payments adoption

• ▪Daily transaction volume for Circle's agentic payments has fallen to about $41,900, with an average transaction size of 24 cents.
• ▪Morgan Stanley is skeptical of Circle's agentic payments initiative, citing limited commercial adoption.

Distribution economics challenges

• ▪JPMorgan previously downgraded Circle after a revised agreement with crypto exchange Hyperliquid weakened USDC's economics.
• ▪Analyst James Faucette stated Circle is shifting toward lower-margin transaction revenue as its reserve income is pressured.
• ▪A JPMorgan report noted a "prisoner's dilemma" between Circle and Coinbase regarding competition for USDC distribution at the expense of profitability.

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