Wall Street trader Bernstein said Circle (CRCL) could take a hit to its revenue if U.S. rates fall sharply, but strong demand for stablecoins and operating leverage may help soften the blow.
Each 25 basis point drop in rates would cut 2027 revenue by about 9% and EBITDA by 11%, and rates below 2% would imply $668 million in EBITDA and 33% compound annual growth (CAGR) from 2024 to 2027, analysts led by Gautam Chhugani wrote in Tuesday’s report.
Stablecoins are cryptocurrencies whose value is pegged to another asset, such as the US dollar or gold. They play an important role in the cryptocurrency markets as they provide payment infrastructure and are also used to transfer money internationally. Tether’s USDT is the largest stablecoin, followed by Circle’s USDC.
The brokerage has an Outperform rating on Circle stock with a $230 price target. The stock was down 2.3% in early trading, around $134.40.
Even in a low-rate scenario, Circle’s USDC supply could exceed the base case of $170 billion, as lower borrowing costs increase risk appetite and demand on exchanges like Binance and in decentralized finance (DeFi) markets, where USDC is a key collateral asset, Bernstein said.
“We expect the industry’s total stablecoins to grow to ~$670 billion by 2027E, driven largely by growth in crypto capital markets,” the analysts wrote, and “Circle USDC will increase its market share to 33% by 2027E.”
The broker expects Circle’s operating margins to widen to 51% by 2027 from 43% in 2024 as supply quintuples, allowing profitability to be maintained even as float revenues decline.
Other revenue, a high-margin line tied to transaction and integration services, is also rising rapidly, reaching 9% of total revenue in the bear case, the report notes.
Bernstein concluded that Circle’s earnings remain sensitive to rates, but the growth and scale of demand should keep the business resilient.
Read more: Citizens Begins Market Performance Rating Circle Coverage of Stablecoin Growth and Valuation
