Citizens Initiates Coverage on Circle (CRCL) with Market Perform Rating Amid Stablecoin Growth and Valuation Concerns

Citizens Initiates Coverage on Circle Internet (CRCL)

U.S. bank Citizens, specifically its JMP division, initiated coverage on Circle Internet Group (NYSE:CRCL), a prominent fintech and stablecoin company, on September 30, 2025, assigning a "Market Perform" rating. This rating, generally considered hold-equivalent, aligns with the consensus of several sell-side analysts and industry observers. Analysts Devin Ryan, Brian McKenna, and Brian Fitzgerald underscored Circle's compelling long-term growth prospects, intrinsically linked to the burgeoning stablecoin and tokenized finance sectors. However, they concluded that the company's current share price largely reflects their base-case scenario for its future performance.

Circle Internet Group currently commands a market capitalization estimated between $30.43 billion and $31.64 billion. Shares of CRCL were trading around $133 per share, having seen a modest pre-market rise of +2.02% to $136.36 on Tuesday. The company successfully completed its Initial Public Offering (IPO) in June 2025, raising approximately $1.05 billion, with Circle itself securing around $458.8 million from the offering.

Valuation Considerations and Financial Posture

Citizens' "Market Perform" rating largely stems from valuation concerns. The bank considers Circle's current trading multiples, specifically 39x and 23x Enterprise Value (EV) to 2026E and 2027E EBITDA, to represent an "excessive premium." This view is echoed by InvestingPro's Fair Value analysis, which also indicates the stock may be overvalued at its current levels. While Circle maintains a strong cash position with over $1 billion post-IPO, providing ample capital for strategic investments and acquisitions, its financial health metrics present a nuanced picture. The company has reported a Return on Equity (ROE) of -33.96% and a Return on Assets (ROA) of -0.73%, suggesting challenges in generating returns from its equity and asset base. Furthermore, CRCL's P/E ratio is significantly negative, ranging from -10,481.43 to -10,544.97, and its Altman Z-Score of 0.29 places it in a distress zone, indicating potential bankruptcy risk within two years.

In its Q2 2025 earnings report, Circle demonstrated robust revenue growth alongside a reported net loss. Total revenue and reserve income reached $658 million, a 53% year-over-year increase, fueled by rising USDC adoption, expanding subscription services, and increased activity in decentralized finance. However, the company posted a net loss of $482 million for the quarter, primarily attributable to $591 million in non-cash IPO-related expenses, including $424 million in stock-based compensation and a $167 million revaluation of convertible debt. Despite the net loss, adjusted EBITDA rose 52% year-over-year to $126 million, reflecting strong operational leverage. It is important to note that Circle's primary revenue source is the interest earned on the U.S. dollar reserves backing USDC, making its business model sensitive to prevailing interest rate environments.

The Expanding Stablecoin Ecosystem and Circle's Strategic Position

Circle is a pivotal player in the stablecoin landscape, being the leading issuer and infrastructure provider for stablecoins such as USDC and EURC. Its USDC circulation has notably doubled year-over-year, reaching approximately $74 billion, which is fully backed by cash and treasuries. This commitment to full backing, coupled with a compliance-first approach, forms a significant competitive moat for Circle, distinguishing it from other crypto entities that focus primarily on volatile asset acquisition.

Circle's strategic infrastructure suite includes the Cross-Chain Transfer Protocol, Programmable Wallets, the Circle Payments Network (CPN), Gateway, and USYC, alongside the ongoing development of Arc, a Layer-1 blockchain specifically designed for institutional stablecoin finance. The CPN, launched in April 2025, aims to facilitate near-instant, 24/7 cross-border payments in stablecoins, directly connecting financial institutions and posing a challenge to traditional payment processors. The planned public testnet launch of Arc between September and November 2025 is anticipated to be a major technological catalyst, purpose-built for stablecoin and foreign exchange (FX) payments, featuring USDC as its native gas token and sub-second settlement finality.

The broader stablecoin market is experiencing an inflection point, with analysts projecting its market capitalization to grow substantially from an estimated $300 billion today to $3 trillion by 2030. Citi experts, in particular, forecast base-case issuance of $1.9 trillion by 2030, with a bullish scenario reaching $4 trillion. This growth is underpinned by several factors, including the increasing regulatory clarity provided by initiatives like the U.S. GENIUS Act and Europe’s MiCAR framework, which aim to foster institutional trust and adoption. Regulatory regimes are prioritizing monetary sovereignty and curbing illicit finance, while also ensuring the dominance of USD stablecoins.

Institutional adoption further accelerates this trend, exemplified by initiatives such as JPMorgan's Onyx, Visa's USDC settlements, and PayPal's PYUSD. New Layer-1 blockchains, like Solana, are enhancing scalability, and the tokenization of real-world assets (RWAs) is also contributing to the ecosystem. Circle is actively forging significant enterprise partnerships, including a notable collaboration with Deutsche Börse Group to integrate USDC and EURC into Europe's traditional financial infrastructure. Other expanded partnerships include Binance for wider Circle Wallets technology adoption, Corpay for 24/7 settlement via its FX and card network, and FIS to enable U.S. financial institutions to offer domestic USDC services.

Analyst Perspectives on Future Outlook

Citizens' analysts acknowledge the wide range of potential outcomes and hypothetical scenarios that could still deliver compelling upside for CRCL, particularly given the nascent stage of the stablecoin industry. They highlight the company's compliance-first approach as a key differentiator. Citi experts, including Sophia Bantanidis, Ronak Shah, and Ronit Ghose, emphasize that regulatory clarity, institutional adoption, and the emergence of new Layer-1 blockchains are critical catalysts for the market's expansion. They recommend that regulators harmonize rules without stifling innovation, banks integrate stablecoins into core systems, and corporates pilot on-chain treasuries. Jeremy Allaire, Co-Founder, Chairman, and CEO of Circle, affirmed that the collaboration with Deutsche Börse will "advance the use of regulated stablecoins across Europe's market infrastructure—reducing settlement risk, lowering costs, and improving efficiency for banks, asset managers, and the wider market."

Key Factors for Observation

Going forward, several key factors will be crucial for monitoring Circle's growth trajectory and the broader stablecoin market. These include the continued growth in USDC circulation, the evolution of its margins and fee revenue ramp, and its sensitivity to yields, which directly impacts its primary revenue source. The successful deployment of new payment corridors and the formation of additional enterprise partnerships will also be vital. Furthermore, the development and adoption of Arc's testnet, alongside the full implementation of MiCA and other regulatory frameworks, will shape the operational landscape. Investors should also monitor competitive pressures, including those from traditional banks exploring their own tokenized deposit solutions and the impact of Coinbase distribution, to assess Circle's continued market positioning.