Investment Bank Warns Circle Internet Is Overvalued Amid Rising Costs & Interest Rates

This content does not constitute investment advice. The author does not hold any positions in the stocks mentioned herein.

Today, Mizuho, an investment bank, has initiated coverage of Circle Internet Group with an Underperform rating, issuing a share price target of $85. As one of the few initial public offerings (IPOs) for 2025 so far, Circle’s stock has made headlines as one of the year’s standout performers. Since its trading debut in June, the stock has surged by an impressive 149%.However, this dramatic increase has drawn skepticism from notable investment banks regarding the potential overvaluation of the company’s stock. Mizuho’s price target reflects this caution, especially as Circle’s shares have recently dropped 21% from their peak in late June.

Mizuho Raises Concerns Over Potential 30% Downside Revenue Risk for Circle Internet in FY27

Circle is widely recognized for its stablecoin, USDC, which has garnered significant interest among retail investors, particularly in light of growing public concerns regarding U. S.fiscal stability, national deficits, and government spending. Mizuho analysts suggest that the market may be mispricing Circle’s USDC, arguing that the consensus revenue estimate of $4.5 billion for FY27 does not account for anticipated “looming interest rate cuts, ”nor does it accurately reflect “USDC’s medium-term growth potential.”

Mizuho’s Underperform rating aligns with assessments from other investment giants like Goldman Sachs and JPMorgan. In a report released in June, JPMorgan acknowledged Circle’s advantage as an early entrant in the digital transaction landscape but characterized its valuation as “elevated, ”assigning an $80 price target. Similarly, Goldman set a price target of $83, recognizing Circle’s early market position while still expressing caution similar to Mizuho.

Mizuho suggests a potential downside risk of “25-30%”to the consensus revenue estimates of $4.5 billion for FY27. They also express concern over Circle’s partnership with Coinbase, which complicates revenue dynamics. With Circle sharing 50% of its USDC revenue with Coinbase, and Coinbase also playing a significant role in the establishment of USDC, this partnership has considerable implications for Circle’s financial performance.

Revenue-sharing arrangements significantly impact Circle’s financials. In the previous year, Circle reported revenues of $1.7 billion, out of which approximately $1 billion was allocated to distribution costs, with over 90% directed towards Coinbase. Mizuho indicates that these rising distribution costs (projected at an 88% compound annual growth rate from 2022 to 2024 compared to 50% for reserve income) could limit Circle’s profitability, as partners like Coinbase maintain a substantial share of the economic benefits associated with USDC.

In contrast to the $4.5 billion consensus revenue estimate, Mizuho posits that a more realistic projection would be around $3.3 billion. This figure considers a healthy estimated compound annual growth rate of approximately 30% for USDC circulation between Q2 2025 and Q4 2027, while also factoring in interest rates being lowered by over 100 basis points. Essentially, Mizuho advocates for a recalibration of market expectations regarding interest rate cuts and stablecoin circulation growth rates, which, they argue, would better align Circle’s valuation with its underlying financial realities.

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