Key Takeaways
- Circle plans to take USDC into about 40 emerging and developing markets, CEO Jeremy Allaire told Reuters.
- Binance bought $100 million of Circle shares at $80.84 and renewed its partnership for five years.
- Reserve income, about 95% of revenue, grew only 5% in Q2 as the reserve return rate dropped 66 basis points.
- Q3 results on November 4 will show whether USDC growth can outpace lower interest rates.
Circle Internet Group (CRCL) stock rose 5.5% to $86 on Tuesday. But the bigger story is where Circle wants USDC to go next.
CEO Jeremy Allaire told Reuters the company plans to enter about 40 emerging and developing markets. “We’re kind of going through an inflection point,” he said.
The stock rose 5.5% to $86 on Tuesday. That still leaves it 42% below its 52-week high of $147.
Partners are carrying USDC further
USDC is a stablecoin, a digital token pegged one to one to the U.S. dollar. Circle earns money mainly on the reserves that back it.
Three recent deals widen where USDC can go:
- Binance bought $100 million of Circle shares at $80.84 and renewed its partnership for five years
- SAP’s cloud ERP software now supports USDC and EURC payments
- Volante Technologies is bringing USDC settlement tools to banks
Wider reach costs money, though, because partners take a cut…
Circle’s gross margin over the past twelve months is just 22.0%. Much of each revenue dollar flows out to distribution partners before Circle keeps anything.
Payments, not trading, is the prize
USDC in circulation ended Q2 at $73.3 billion, up 19% from a year earlier. On-chain volume jumped 151% to $14.8 trillion.
Allaire also pointed to the GENIUS Act, the U.S. stablecoin law set to take effect next January. “When the Genius Act goes into law, the world will have legal digital dollars,” he told Reuters.
Analysts expect that usage to lift sales steadily…
Q2 revenue and reserve income hit $701 million, up 7%. Consensus calls for about 17.8% annual revenue growth over the next two years.
TIKR tracks 29 analysts on Circle Internet Group. How many say “Buy”?
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Interest rates still set the earnings
Reserve income was $668 million in Q2, about 95% of the total. It rose only 5% while average USDC grew 25%, because the reserve return rate dropped 66 basis points.
So each rate cut bites, and that makes the valuation demanding…
Shares trade at 68.6x forward earnings, yet the average analyst target of $107 points to about 25% upside.
My take: The 40-market plan and the bank deals are the right moves, since payments revenue is stickier than trading flows. Still, Circle remains mostly a bet on interest rates for now. I’d want to see non-reserve revenue grow before paying 68.6x earnings.
Q3 results on November 4 will show USDC circulation and the latest reserve yield. A new CFO also needs naming, since Jeremy Fox-Geen leaves in December.
So what is Circle Internet Group stock actually worth?
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