Mizuho Turns Bearish on USDC as Growth Slows, Costs Climb

• Mizuho flags slowing USDC growth and rising costs as core risks behind its $70 target.
• Analyst targets differ in forecast as JPMorgan and Baird cite stronger earnings momentum.
• IPO trend data shows elevated post-lockup risk as Circle’s stock extends steep declines.

Circle Internet Group faces pressure after Mizuho Securities cut its base case price target to $70 as the firm flagged slowing USDC growth, rising distribution costs, and the impact of upcoming interest rate cuts. 

The downgrade came as Circle’s stock traded near $82 in New York, almost 40% lower over the past month. Mizuho said the company’s earnings outlook may weaken as revenue relies heavily on interest income from USDC reserves.

Slowing USDC Growth Raises New Questions

Mizuho analysts said USDC circulation has remained relatively stagnant, which increases concern as the stablecoin is behind only Tether’s USDT in terms of supply. That slowdown links to Circle’s dependence on interest income because lower growth limits reserve expansion. 

This also connects to Mizuho’s view that falling rates could pressure earnings since Circle earns most of its revenue from short-term Treasuries and repurchase agreements. However, the firm also pointed to structurally high and growing distribution costs, which could squeeze margins further. 

Those rising costs led to stronger competition among stablecoins, creating another threat to Circle’s medium-term revenue. Mizuho analysts said this combination of trends increases the risk of downward earnings revisions over the coming years.

Differing Analyst Targets 

The downgrade shows a wide gap between Mizuho’s bearish stance and JPMorgan’s more optimistic outlook. As per JPMorgan, the recent stock decline linked to lockup expiration concerns may offer a buy-low window. 

The bank raised its price target to $100 after Circle beat expectations in its third-quarter earnings report. That report showed $740 million in revenue and $166 million in adjusted EBITDA, above forecasts by 5% and 26%.

That beat did not stop a 10% drop in Circle’s stock, which extended losses driven by fears of declining rates. The contrasting price targets of $70 from Mizuho, $100 from JPMorgan, and $110 from Baird show the lack of consensus on Circle’s outlook. 

Baird upgraded the stock to Outperform after the earnings release, although it lowered its target from $144 due to rising costs.

Related: Tether Eyes €1B Robotics Deal in a Move Beyond Stablecoins

Historical IPO Trends Increase Concerns

Mizuho analyst Dan Dolev cited research on more than 750 IPOs over two decades to support the bearish call. The study found that 58% of companies that outperformed market indexes before their lockup expiration underperformed the S&P 500 by an average of 2% in the 180 days that followed. Circle fits that pattern because its shares surged more than 200% after its June IPO.

That performance changed quickly as the stock dropped about 68% from its June 23 peak. Mizuho said companies missing revenue expectations within a year of listing historically underperformed by around 10%, raising more questions about Circle’s long-term consensus forecasts. Although Circle beat third-quarter numbers, the firm noted concerns about fiscal year 2025 expectations.

However, other firms offered mixed adjustments. Needham kept a Buy rating but cut its target to $190. Bernstein maintained an Outperform rating despite stock volatility. These differing assessments show an active scrutiny on whether Circle can expand USDC utility fast enough to offset the coming fall in yield-driven revenue.

Mizuho noted Circle’s three pressure points. These are slower USDC growth, rising distribution costs, and the earnings hit from expected rate cuts. Analysts remain divided as strong quarterly results contrast with the stock’s steep declines and heavy reliance on interest income.