Circle Stock Oversold Amid Earnings Dip: Long-Term Growth Signals Justify Buying the Dip

Despite technical indicators flashing an oversold signal-e.g., the 14-day RSI dipping to 28.65 on November 12, 2025, according to a Barchart analysis-the recent 10% share decline following a beat on Q3 results masks underlying operational headwinds. Management's decision to raise full-year operating expense guidance to $495M-$510M, as noted in the Barchart analysis, directly contradicts the dip-buying thesis, signaling margin pressure that could persist even if short-term sentiment rebounds.

The divergence between technicals and fundamentals is stark. While the longer-term 100-day RSI above 50 suggests lingering bullish momentum, the expense hike implies cost inflation is outpacing revenue growth-a dynamic that would erode profitability even as circulation of USDC accelerates. Wall Street's 'Hold' rating and 90% upside target to $167, as reported by Barchart, ignore this risk, treating the dip as a buying opportunity rather than a warning sign of deteriorating economics.

For risk-averse investors, the oversold RSI becomes a red flag, not a green light. If expense growth exceeds revenue momentum, the stock's price-to-sales multiple at 10.6x remains stretched. Until profitability improves or cost controls materialize, the technical rebound could be a temporary reprieve-akin to a patient seeing a benign fever spike while ignoring a rising white blood cell count. The falsifier here isn't analyst sentiment; it's whether operating margins narrow in the next two quarters.

The headline figures from Circle's Q3 performance are undeniably impressive. USDC circulation more than doubled year-on-year to $73.7 billion, a surge that directly fueled reserve income growth of 60% to $711 million and propelled total revenue up 66% to $740 million. Profitability metrics improved dramatically, with net income jumping 202% to $214 million and Adjusted EBITDA rising 78% to $166 million. Strategic initiatives like the Arc testnet launch and CPN expansion demonstrate active execution.

However, beneath this robust top-line growth lies a growing tension threatening sustainability. Operating expenses surged 70% year-on-year, significantly outpacing the 66% revenue increase. This widening cost base directly pressured margins, contributing to the post-earnings stock dip analysts attributed partly to higher operating expenses alongside a drop in 'other' revenue. Mizuho's Dan Dolev, as noted in the Barchart analysis, framing this as a potential catalyst for further Q4 declines underscores the market's unease about cost discipline.

The regulatory environment compounds these operational challenges. While the Genius Act offers potential long-term tailwinds, the path to implementation remains complex and protracted. Simultaneously, the company's plans for a native token launch introduce additional layers of regulatory scrutiny and operational risk. These factors create a high-stakes environment where the sheer expense of scaling operations and navigating evolving compliance requirements could quickly erode the profitability gains achieved from the USDC surge. The market's mixed reaction-optimism about USDC's standardization potential offset by concerns over expense growth and regulatory execution-reflects this core uncertainty about whether current profitability can be maintained as costs escalate and regulatory demands intensify.

The post-earnings plunge dragged Circle shares into technically oversold territory, according to the Barchart analysis, offering a tempting entry point for some. Yet beneath the dip lies a valuation that feels increasingly disconnected from mounting operational and regulatory risks. The current 10.6x price-to-sales multiple, while seemingly benign for a high-growth firm, doesn't adequately price in the near-term headwinds analysts are flagging. Management's guidance to push operating expenses into the $495-510 million range, as noted in the Barchart analysis, a 70% surge YoY, directly conflicts with Mizuho's Dan Dolev view that Q4 faces further pressure from lower non-reserve revenue and escalating costs, as reported in a Fortune piece. This expense explosion, coupled with a reserve return plummeting to 4.2%, as reported in the Fortune piece, erodes the profitability runway investors expect when paying a premium for growth. Furthermore, the narrative of effortless circulation growth – despite the 40% CAGR outlook – faces scrutiny given the revenue growth decoupling from reserve performance. Regulatory complexities, specifically the pending Genius Act and the untested mechanics of a native token launch, as reported in the Fortune piece, introduce significant execution uncertainty. The $167 analyst mean target implying 90% upside, as reported by Barchart, assumes these risks materialize favorably, a gamble when the fundamental cash flow trajectory is being strained by rising costs and lower returns on core assets. The real question isn't just whether USDC adoption accelerates, but whether the cost and regulatory environment can sustain the premium valuation.

The recent 10% stock plunge, while carving out an oversold technical signal (14-day RSI: 28.65), demands clarity on what could realistically restore confidence and alter the current risk/reward calculus. Three concrete catalysts stand out as pivotal. First, tangible progress on the Genius Act by January 15, 2026, remains the single largest structural tailwind, potentially unlocking broader institutional adoption and regulatory certainty for stablecoins. Second, the Q4 results release on February 15, 2026, offers a critical data point: management will need to demonstrate that the 66% YoY revenue surge and dramatic USDC circulation growth, as reported in a Circle press release, can translate into margin resilience despite the significant expense ramp-up, as noted in the Barchart analysis. Third, the non-reserve revenue guidance and operating expense trajectory through year-end will be crucial – the revised $495M-$510M full-year guidance, as noted in the Barchart analysis, signals heightened cost pressure analysts worry could persist into Q4.

Given the mixed analyst outlook – with Mizuho expecting further decline on expense headwinds but William Blair eyeing a 90% upside, as reported in the Fortune piece, positioning must be strictly controlled by measurable guardrails tied to these events. Our base case assumes the Genius Act advances but faces delays, and Q4 results meet expectations but highlight the expense challenge. In this scenario, we define a maximum entry point only if the 14-day RSI dips below 30 and Q3 reserve income growth (60% YoY) holds firm, as reported in the Circle press release, viewing the current price-to-sales at 10.6x as potentially reasonable only under these strict oversold and growth-retention conditions, as noted in the Barchart analysis. A bear case emerges if Q4 operating expenses exceed $130M (projected monthly average) or if the Genius Act progress stalls significantly by mid-January, forcing a defensive posture. Conversely, a strong bullish signal would require both Q4 results exceeding the high end of guidance and explicit confirmation that the native token launch is on track, pushing the 14-day RSI above 40. For now, the oversold reading offers a technical entry point only if the fundamental guardrails – particularly sustained reserve income momentum and controlled expenses – remain intact, acknowledging the significant path dependency on regulatory and operational execution.