Passage Research issued a strong sell rating for Circle on Seeking Alpha, arguing the company is overvalued at 37 times EV/EBITDA.
The analysis highlights that 96% of Circle’s revenue is derived from reserve income on USDC-backed assets. This concentration makes the company’s earnings highly sensitive to potential declines in treasury yields.
Circle’s stock recently declined 30% as traditional financial players like JPMorgan and SoFi enter the stablecoin market. These moves suggest a shrinking regulatory moat for the firm.
In a conflicting report, a separate Seeking Alpha analyst upgraded Circle to a buy rating on the same day. This outlook cites improving operating margins and diminishing risks regarding its distribution partner, Coinbase.