Wall Street analysts split on Circle after blockbuster IPO on lofty valuation concerns

Wall Street brokerages had mixed recommendations on stablecoin issuer Circle Internet Group as they began coverage on Monday, with some analysts expressing concerns about its elevated valuation after the stock more than doubled since its market debut.

The New York-based company’s shares were up 4% in choppy early trading.

Circle debuted this month at $69 per share in the first major IPO by a stablecoin issuer. The blockbuster flotation represents the biggest crypto listing since Coinbase’s 2021 debut. The company had priced its IPO at $31 per share.

J.P. Morgan, Citigroup and Goldman Sachs were the lead underwriters for the offering.

After the industry-mandated quiet period expired, Barclays, Bernstein, Canaccord Genuity and Needham launched coverage with the equivalent of ‘buy’ ratings and price targets above $200 betting on the rapid global adoption of stablecoins as they gain traction, positioning themselves to become integral to the traditional financial ecosystem.

“CRCL is building a market-leading digital dollar stablecoin network, with a strong regulatory edge, liquidity headstart and marquee distribution partnerships. This is hard to replicate, in our view,” Bernstein analysts said in a note.

‘SWITZERLAND’ OF STABLE COINS

Circle is a blockchain infrastructure company best known for issuing USD Coin (USDC), a fully reserved, U.S. dollar-backed stablecoin used across crypto trading, payments, and decentralized finance.

“Circle’s strategic positioning as the “Switzerland” of stablecoins makes it a standout for long-term success,” Canaccord analysts said.

In June, the U.S. Senate passed the GENIUS Act with bipartisan support, marking a watershed moment for the digital asset industry by establishing the first federal regulatory framework for stablecoins.

“CRCL is one of the only ways for public investors to play the blockchain infrastructure theme, and we believe stablecoins are nearing a pivotal turning point,” Barclays noted.

LOFTY VALUATIONS A CONCERN

However, J.P. Morgan and Goldman Sachs pointed to the stock’s elevated valuation, given its rapid rise since the IPO.

J.P. Morgan started coverage with the most bearish view on Wall Street - an ‘underweight’ rating with a price target of $80, implying a downside of 56% from the stock’s last close of $180.43.

“We view CRCL’s business and growth attractively, but valuation appears elevated,” said Goldman, as the brokerage started coverage with ‘neutral’ and $83 price target.

As of last close, shares of Circle have sky-rocketed 161% since their market debut.

“While we see potential for strong long-term industry adoption of stablecoins, the range of outcomes are very wide and likely to create substantial volatility in earnings revisions and the share price for at least the near-to-intermediate term,” Deutsche Bank analysts added.

Below are brokerage ratings and price targets on Circle:

Brokerage Rating PT

J.P.Morgan Underweight $80

Goldman Sachs Neutral $83

Deutsche Bank Hold $155

Oppenheimer Perform NA

Barclays Overweight $215

Bernstein Outperform $230

Canaccord Genuity Buy $247

Needham Buy $250

Aerospace supplier TransDigm Group said on Monday it will acquire Simmonds Precision Products from defense contractor RTX Corp for about $765 million in cash.

Simmonds makes fuel and proximity sensing and structural health monitoring products for the aerospace and defense industry.

Cleveland, Ohio-based TransDigm supplies aircraft components such as cockpit security systems and engine sensors for commercial and military jets, and counts planemakers Boeing and Airbus among its customers.

TransDigm said the deal is expected to be financed through existing cash on hand.