Why is Circle Internet stock down over 5% today?

Circle Internet Group stock fell 5.5% in pre-open trading after Morgan Stanley delivered one of the most aggressive bearish calls the stablecoin company has received since its IPO, downgrading shares from Equalweight to Underweight and cutting its price target to $38 from $106. The bank’s analysts argued that contraction in USDC supply is exposing the company’s heavy dependence on reserve income, and reduced their USDC assumptions by approximately 33% for 2027 and approximately 44% for 2028 — pushing their GAAP EPS estimates roughly 3% to 20% below the current Wall Street consensus.

The downgrade landed alongside a contrasting note from TD Cowen, which initiated coverage with a Buy rating and an $82 price target, projecting USDC circulation growing at roughly a 31% compound annual rate through 2030 and pointing to fee-based revenue streams as a source of faster compounding growth. However, the severity of the Morgan Stanley call — and the timing just ahead of Circle’s Q2 2026 earnings release scheduled for August 5 — proved far more influential with investors, who have already been on edge following a string of target reductions from Bernstein, Goldman Sachs, and Mizuho over the past several weeks.

The broader competitive backdrop continues to weigh on sentiment. A 140-firm consortium that includes major financial players launched the rival Open USD stablecoin in late June, raising questions about Circle’s long-term pricing power and the durability of its reserve-income model. Meanwhile, the wider U.S. equity market is modestly higher today, with the S&P 500 gaining 0.5% and the Nasdaq up 0.6%, underscoring that today’s pressure on CRCL is driven entirely by company-specific factors rather than any macro headwind.

The combination of a street-low price target from a major Wall Street bank, pre-earnings uncertainty, and an increasingly crowded stablecoin competitive landscape has created a difficult setup for the stock in the near term. With Q2 results due in two days, investors appear to be de-risking ahead of a print that Morgan Stanley now expects will fall short of consensus expectations.