JPMorgan has initiated coverage of Circle (CRCL) shares with an underweight rating and a price target of $80 by December 2026. This rating implies a 55% decrease from the current $180 price. The target is calculated using a 45x multiple of estimated 2027 earnings per share plus a $10 upside premium.
They acknowledge Circle's strong early-mover advantage in the stablecoin sector and its expanding use cases. However, JPMorgan analysts believe the current $43.8 billion market capitalization is excessive. Their price prediction indicates a market capitalization of around $21B by late 2026.
Competitors in stablecoins and crypto investment products pose a significant risk. The analysts emphasize the low switching costs in this market, which may allow competitors to use Circle's network.
Regulatory risks also exist. This would include prospective US stablecoin legislation requiring issuers to keep equity capital proportionate to stablecoins in circulation, which might limit USDC growth. The global adoption of central bank digital currencies (CBDCs) may limit Circle's international expansion and profitability.
Despite these obstacles, JPMorgan believes Circle is well-positioned, but advises caution due to valuation and market risk.
