Analysts sounds alarm on Circle stock as supply stalls

It has been more than a month since Circle Internet Group (NYSE: CRCL), the crypto company, went public on June 5.

Since making its public debut, the Circle stock has rocketed as much as 600%, and most analysts are extremely bullish on it.

However, analysts at Mizuho Securities have projected a rather bearish outlook on the CRCL stock.

For the uninitiated, Circle is the company behind the USDC stablecoin. A stablecoin is a type of cryptocurrency that attempts to stabilize its value, unlike traditionally volatile cryptocurrencies such as Bitcoin.

Analysts at the Japanese investment banking and securities firm have said CRCL's valuation doesn't appropriately reflect key risks to the earnings over the medium term.

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Led by Dan Dolev, Mizuho analysts have granted the CRCL stock an "underperform" rating and the price target of $85.

Note that the stock debuted with an IPO price of $31 a share and was trading at $207.36 at press time. So, Mizuho's evaluation of CRCL is rather underwhelming.

"Over time, we also worry that the advancement of regulation like the GENIUS Act invites more competition and raises commoditization risk for dollar-based stablecoins like USDC," Mizuho's note read.

The analysts also said the company's target of reaching a revenue of $4.5 billion in 2027 may be unrealistic and 25%-30% too high because interest rates are expected to fall and USDC supply has remained flat at $62 billion since April.

With a market cap of $61.67 billion, Circle's USDC is the second-largest stablecoin. But it accounts for a little less than 25% of the total stablecoin market cap of $255.46 billion, as per DeFiLlama.

In contrast, the largest stablecoin, Tether's USDT, holds a market cap of $159.52 billion and accounts for more than 62% of the total market share.