Circle Stock Drops 68% Post-IPO, Analysts Warn of Revenue Risks

Circle (CRCL), issuer of the USDC stablecoin, has seen its stock drop 68% from a peak of $298 in June to around $82.

Upcoming Lockup Period Expiration

Circle's lockup period ends soon after its third-quarter earnings announcement this Friday.
Historically, 58% of IPOs outperforming the S&P 500 before their lockup underperform in the following 180 days, with an average decline of 2%.
Companies missing revenue expectations post-IPO often see an average negative return of about 10% relative to the S&P 500.

The company heavily relies on interest from USDC reserves held in short-term US Treasuries and cash. A decrease in interest rates or slower USDC growth could negatively affect revenues.

Mizuho expects downward revisions for Circle due to declining rates and slower USDC growth, along with rising distribution costs.

Investment Considerations

Circle surpassed revenue and earnings estimates in its Q3 report.
JP Morgan upgraded the stock from Underweight to Overweight, raising its price target to $100, citing stablecoin acceptance in mainstream finance.
Analyst Kenneth Worthington describes it as a "buy-low opportunity" due to potential undervaluation post-lockup expiration.

Circle