"Compass Point's bearish thesis centers on valuation and structural risks. Circle Internet's revenue is overwhelmingly driven by reserve income on assets backing USDC, its flagship stablecoin. That reserve return rate has been declining, falling 68 basis points year-over-year in Q4 to 3.8%, making the top line acutely sensitive to interest rate movements."
"Distribution costs compound the concern. Circle Internet's Q4 distribution costs reached $461 million, reflecting heavy reliance on Coinbase and other key partners. The forward valuation is stretched: the stock trades at a forward P/E ratio of 87x and an EV/EBITDA of 124x."
"Circle Internet issues USDC, the world's second-largest stablecoin, with $75.3 billion in circulation at year-end 2025 and 28% stablecoin market share. The company also operates the Circle Payments Network, the EURC euro stablecoin, and the USYC tokenized money market fund."
Circle Internet's stock has received its first Sell rating from Compass Point, with a price target of $77, indicating potential downside. Despite a 12% year-to-date increase, the stock remains below its 52-week high. The bearish outlook is based on declining reserve income from USDC and high distribution costs. Circle Internet's revenue for 2025 was $2.75 billion, but it reported a net loss of $69.52 million. The company's valuation metrics are concerning, with a forward P/E ratio of 87x and an EV/EBITDA of 124x.
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