Circle Can Withstand Rate Cuts as Stablecoin Demand Grows: Bernstein

Wall Street broker Bernstein said Circle (CRCL) could take a revenue hit if U.S. rates fall sharply, but strong stablecoin demand and operating leverage may help soften the blow.

Every 25 basis point drop in rates would trim 2027 revenue by about 9% and EBITDA by 11%, with rates below 2% implying $668 million in EBITDA and 33% compound annual growth (CAGR) from 2024 to 2027, analysts led by Gautam Chhugani wrote in the Tuesday report.

Stablecoins are cryptocurrencies whose value is tied to another asset, such as the U.S. dollar or gold. They play a major role in cryptocurrency markets, providing a payment infrastructure, and are also used to transfer money internationally. Tether's USDT is the largest stablecoin, followed by Circle's USDC.

The broker has an outperform rating on Circle stock with a $230 price target. The stock was 2.3% lower in early trade, around $134.40.

Even in a low-rate scenario, Circle’s USDC supply could exceed the $170 billion base case as lower borrowing costs boost 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 total industry stablecoins to grow to ~$670B by 2027E, largely driven by growth of crypto capital markets," the analysts wrote, and "Circle’s USDC to increase market share to 33% by 2027E."

The broker expects Circle operating margins to widen to 51% by 2027 from 43% in 2024 as supply grows five-fold, allowing profitability to hold up even as float income shrinks.

Other revenue, a high-margin line tied to integration and transaction services, is also rising fast, reaching 9% of total revenue in the bear case, the report noted.

Bernstein concluded that Circle’s earnings remain rate-sensitive, but demand growth and scale should keep the business resilient.

Read more: Citizens Starts Circle Coverage With Market Perform Rating on Stablecoin Growth, Valuation