BlockBeats News, June 30th, Morgan Stanley, a major U.S. investment bank, for the first time initiated coverage on Circle (CRCL) stock, giving it an "Underweight" rating with a target price of $80 by December 2026.

Leading the analysis was Kenneth Worthington of Morgan Stanley's analyst team, who on Monday released the first official Circle stock analysis report. This target price is 55% lower than Circle's current price of $180, calculated based on a 45x multiple of expected earnings per share (EPS) for 2027, with an additional $10 upside potential premium.

While Morgan Stanley analysts believe Circle has a favorable position in the emerging stablecoin market due to its first-mover advantage and numerous use cases, they noted that its current valuation is high. According to data from CompaniesMarketCap, 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: "Our 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 "Underweight" rating on Circle, Morgan Stanley analysts mentioned several factors that could potentially harm the company's valuation in the coming months, including the impact of market competition. The analysts stated: "We see competition as a potential threat to Circle," which includes both direct stablecoin competitors and other crypto investment products such as tokenized deposit accounts and digital currency money market funds. "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, Morgan Stanley 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 Morgan Stanley 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.