Circle Internet Group (NYSE: CRCL), the second-largest issuer of USD stablecoins globally, is positioned for explosive growth over the next few years, as per the emerging consensus of Wall Street analysts, albeit tempered by the newly IPO'ed stock's already-stratospheric valuation.
For the benefit of those who might not be aware, Circle backs each minted USDC token with yield-bearing US Treasuries. As such, the vast majority of Circle's revenue comes from the interest income generated by the USDC reserves, which consist almost exclusively of US Treasuries.
However, Circle also splits its revenue with Coinbase, which remains its strategic partner for providing hefty assistance in launching the USDC stablecoin.
This brings us to the crux of the matter. Bernstein SocGen Group analyst Gautam Chhugani has now initiated Circle stock with a 'Outperform' rating and a price target of $230 per share. The analyst notes:
"CRCL is building a market-leading digital dollar stablecoin network, with a strong regulatory edge, liquidity headstart and marquee distribution partnerships."
Accordingly, Chhugani views Circle as a "must-hold" investment as stablecoins evolve "from money-rail of crypto markets to money-rail of the internet."
Critically, the Bernstein SocGen analyst believes the stablecoin TAM over the next decade will reach a whopping $4 trillion vs. just $225 billion today.
Similarly, Oppenheimer analyst Owen Lau has now initiated his coverage of Circle shares with a 'Perform' rating. While noting that Circle's USDC currently retains a 24 percent global market share, Lau asserts that the stock remains "a 'clean' way to get exposure to blockchain disruption in money market funds, real estate, consumer payments, and capital markets."
On the other hand, Goldman Sachs analyst James Yaro is decidedly less bullish on Circle's immediate prospects, pegging a 'Neutral' rating and an $83 stock price target, largely due to the stock's post-IPO meteoric rise. For context, do note that Circle shares are currently trading at the $185 price handle.
Yaro expects USDC supply to grow at a CAGR of 40 percent between 2024 and 2027, resulting in a CAGR of 26 percent for Circle's revenue.
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