10 Million Reasons to Sell Circle Stock Here
Circle expects to raise roughly $309.4 million from its portion of the offering, or as much as $542.6 million if underwriters exercise their greenshoe option in full. The company says the proceeds will fuel working capital needs, cover payment obligations, and support business investments and potential acquisitions, giving it more firepower to expand its stablecoin footprint. Of course, Circle will not receive any proceeds from the shares sold by existing stockholders.
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With 80% of the secondary offering coming from existing stakeholders, the move signals clear profit-taking by insiders, including the company's CEO, Jeremy Allaire. Moreover, coming just two months after the IPO, the secondary offering has raised questions about the company's outlook, sparked concerns over short-term dilution and has momentarily eclipsed its strong top-line growth in the latest earnings report, as well as its ongoing efforts to advance stablecoin infrastructure.
About Circle Stock
New York-based Circle is a global fintech firm that helps businesses of all sizes use digital currencies and public blockchains for payments, commerce, and other financial applications. Through its regulated affiliates, it issues USDC and EURC, fully backed stablecoins pegged to the U.S. dollar and euro respectively, and runs one of the most widely used stablecoin networks.
Circle, which made its public debut on June 5, is quickly emerging as a rising star in the stablecoin world and the crypto industry. The momentum grew even stronger after the GENIUS Act passed in July, setting clear rules and protections for asset-backed digital tokens like those tied to the U.S. dollar. A big chunk of Circle's revenue comes from interest earned on short-term U.S. Treasury bills that back its dollar-based stablecoin, USDC.
Valued at roughly $38.1 billion by market capitalization, this stablecoin issuer's stock has been feeling the heat lately following a mixed earnings report and uncertainty surrounding a planned 10 million-share secondary sale. After an eye-popping triple-digit surge since its market debut, the rally has lost steam, sliding nearly 47% from its July high of $262.97. Over the past five days, shares have dipped 9%, signaling a cooling-off period after its explosive run.
Despite its recent selloff, Circle still trades at 16.46 times sales, far above the industry average of 3.29x. This sizable premium reflects the strong confidence investors have in the company's growth prospects, while also highlighting that much of the anticipated success may already be priced into the stock.
Inside Circle's Q2 Earnings Report
Circle dropped its first earnings report since its blockbuster public debut on Aug. 12, which gave investors plenty to digest. In the second quarter of fiscal 2025, total revenue came in at $658.1 million, up a hefty 53% from a year ago and topping Wall Street's $644.7 million estimate. The jump was powered by an 86% surge in average USDC in circulation. By the quarter's end, USDC supply had swelled 90% year-over-year (YOY) to $61.3 billion and has since grown another 6.4% to $65.2 billion as of Aug. 10.
Adjusted EBITDA also climbed 52% YOY to $126 million, reflecting the stablecoin's rapid adoption. The headline numbers, however, were overshadowed by a steep bottom-line hit. Circle posted a net loss of $482.1 million, or $4.48 per share, compared to a $32.9 million profit, or breakeven per share, in the year-ago period. The loss was largely the result of $591 million in non-cash charges tied to the company's June IPO. Moreover, adjusted operating expenses shot up 22% annually to $128.2 million.
On the growth front, Circle unveiled 'Arc,' its own proprietary blockchain aimed at powering stablecoin payments, foreign exchange, and capital markets applications. Arc will be built into the company's broader platform and is expected to start developer testing this fall. The company also rolled out a slate of new strategic partnerships with Binance, Corpay (CPAY), FIS (FIS), Fiserv (FI), and OKX, strengthening its global reach.
Looking forward to fiscal 2025, Circle is guiding for $75 million to $85 million in other revenue, with adjusted operating expenses between $475 million and $490 million. The crypto company also sees USDC circulation expanding at a 40% compound annual growth rate (CAGR) over the cycle, underscoring its bullish outlook for the stablecoin market.
What do Analysts Think About Circle Stock?
After the company's latest earnings report, US Tiger Securities analyst Bo Pei has dialed back his optimism, cutting Circle's price target from $200 to $180. While acknowledging the company's strong foothold in regulated stablecoins and the upcoming Arc blockchain, the analyst flagged mounting risks, shrinking profit margins, rising operating costs, and heavy reliance on interest income from reserves. With 96% of revenue still tied to interest-sensitive assets, a Fed rate cut could sting. Plus, the stock's steep valuation leaves little room for error.
Overall, Wall Street appears divided on Circle's outlook, with the stock carrying a consensus 'Hold' rating that reflects a tug-of-war between bullish optimism and bearish caution. Of the 14 analysts tracking the company, five are firmly in the 'Strong Buy' camp, while one takes a softer stance with a 'Moderate Buy.'
On the flip side, four analysts are content to sit on the sidelines with a 'Hold,' and another four are decidedly bearish, labeling it a 'Strong Sell.' CRCL's average analyst price target of $183.54 indicates 19.8% potential upside from current levels, while the Street high price target of $280 suggests that the stock can climb as much as 82.8% from here.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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