JPMorgan Downgrades Circle Stock to Neutral Targeting 56% Drop by 2026

JPMorgan Chase has downgraded Circle stock to "Neutral" with an end-of-2026 price target of $80. This move comes as the investment bank reassesses the company's position in the stablecoin market. The target price of $80 represents a significant reduction from Circle's current price, which is $180. This target price is based on a 45x multiple of expected earnings per share (EPS) for 2027, with an additional $10 upside potential premium.

Analysts at JPMorgan Chase believe that Circle has a favorable position in the emerging stablecoin market due to its first-mover advantage and numerous use cases. However, they noted that the current valuation of Circle is high. According to data, Circle currently has a market capitalization of $43.8 billion, significantly higher since its NYSE debut on June 5th with a market cap of $8 billion. The analysts stated that their target price of $80 by December 2026 implies a market cap of around $21 billion. It is worth noting that the company's IPO was priced at $31, corresponding to an $8 billion market cap.

To justify the "Neutral" rating on Circle, JPMorgan Chase analysts mentioned several factors that could potentially harm the company's valuation in the coming months. These factors include the impact of market competition, which includes both direct stablecoin competitors and other crypto investment products such as tokenized deposit accounts and digital currency money market funds. The analysts stated that the risk is that in the industry with low conversion costs, several competitors may gain enough market share to reach critical mass and take advantage of the network effects Circle has built.

Among other risks, JPMorgan Chase mentioned U.S. stablecoin regulatory policies. These policies may soon require issuers like Circle to hold equivalent equity capital based on the circulating supply of stablecoins, similar to Europe's Markets in Crypto-Assets Regulation (MiCA). While JPMorgan Chase estimates that Circle has enough capital to support its USDC stablecoin held in the U.S., analysts stated that higher capital requirements could limit USDC's growth. Additionally, the analysts emphasized certain risks posed by the development of central bank digital currencies (CBDCs). The report noted that while the U.S. has adopted policies supporting stablecoins to strengthen the dollar's dominance, other countries may exert pressure on Circle's global expansion.