Investing.com -- Compass Point has initiated coverage on Circle Internet Group Inc . (NYSE: CRCL ) with a “neutral” rating and a $205 price target, citing both its leadership in regulated stablecoins and challenges in distribution, in a note dated Tuesday.
Analysts noted that stablecoins could disrupt traditional finance by disintermediating banks and payment networks. Circle, as the largest regulated stablecoin issuer, offers exposure to this trend through its USDC token.
The company’s advanced blockchain technology and liquidity provide it with key advantages, including a complex software stack, open-source APIs, and programmable smart contracts that support features like escrow, chargebacks and AI-driven payments.
Despite these strengths, Compass Point emphasized that distribution will be crucial to stablecoin market share.
Circle’s current distribution partners, primarily Coinbase (NASDAQ: COIN ) and Binance, dominate within the crypto sector but lack the broad consumer reach of mainstream businesses.
About 60% of Circle’s reserve revenue is shared with these partners, with about 50% of off-platform USDC revenue specifically going to Coinbase. This revenue-sharing model could hinder Circle’s ability to form new partnerships on favorable terms.
"Distribution is king," the analysts said in the report, warning that mainstream companies may enter the market through partnerships with alternative issuers like Paxos, retaining 50% to 80% of interest income. Fiserv (NYSE: FI ) has already launched FIUSD, illustrating potential competition from established financial firms.
Valuation remains a concern. CRCL shares trade at more than 100 times EBITDA, reflecting bullish long-term assumptions.
Compass Point projects stablecoins could capture 10% of U.S. M2 money supply by 2030, translating to a $2 trillion addressable market.
With USDC’s market share modeled at 20% to 30%, the firm estimates Circle’s 2030 EBITDA at $3.9 billion.
However, CRCL shares already trade at 32 times the present value of these forecasts, higher than established card issuers like Visa (NYSE: V ) and Mastercard (NYSE: MA ), which trade at 25 times 2025 estimated earnings.
Near-term legislative developments may act as catalysts. The analysts expect stablecoin legislation to pass by August, potentially accelerating adoption. However, full regulation may ease entry for competitors, reducing Circle’s market share and pressuring margins in 2025.
"While USDC has strong distribution within the crypto industry, mainstream businesses have much broader connectivity to end users," the analysts said. The competitive landscape could shift quickly once regulatory clarity is achieved.