Investing.com - Compass Point initiated coverage on Circle Internet Group (OTC:CRCL) with a Neutral rating and a $205 price target on Tuesday.
The research firm views stablecoins as potentially disruptive to the financial system, noting that blockchain technology could disintermediate traditional banks and payment networks. Circle provides pure-play exposure to this technology as the largest issuer of regulated stablecoins.
Compass Point highlighted USDC’s leading technology and liquidity as long-term advantages for Circle. However, the firm emphasized that distribution is a key driver of stablecoin market share, noting that while Circle’s current distribution partners are major crypto players, mainstream businesses have broader connectivity to end users.
The research firm pointed out that Circle is trading at over 100 times EBITDA, indicating investors are not valuing the stock on near-term earnings. The high valuation appears to reflect expectations for future growth in the stablecoin market.
The threat of new entrants and declining gross margins were cited as concerns by Compass Point, factors that contributed to its Neutral stance despite the long-term potential of Circle’s stablecoin business.
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