Circle (CRCL), Stock Price Halved Despite Surprise Performance?...Mizuho "Target Price $45"

▲ Circle (CRCL)/AI Generated Image

Circle (CRCL) could not avoid a stock price decline despite reporting net income exceeding Wall Street expectations.

According to cryptocurrency specialized media CoinGape on August 5 (local time), Circle's stock price rose by about 7% in pre-market trading immediately after the earnings announcement, but then gave back its gains. It subsequently fell by about 3% to $61.9. The previous day, it had risen to $63.25 during trading hours, but its year-to-date decline has exceeded 20%.

Circle's Q2 revenue was $701 million, falling short of Wall Street's expected $717 million. Earnings per share (EPS) were $0.18, exceeding the market forecast of $0.17. Net income also recorded $48 million, surpassing the expected $45.8 million.

Despite strong earnings, Mizuho maintained its "underperform" rating and a target price of $45 for Circle. Mizuho pointed out that USDC circulation in Q2 decreased compared to the previous quarter. On-chain transaction volume decreased by 31% quarter-over-quarter, and adjusted EBITDA margin also fell by 329 basis points year-over-year.

Circle projected an annual USDC circulation growth rate of 40%. It raised its other revenue outlook from the previous $150 million-$170 million to $310 million-$330 million. The RLDC margin outlook was also raised from the previous 38%-40% to 41.7%-43.7%. The adjusted operating expense outlook was maintained at $570 million-$585 million.

[Article Key Summary]

-Circle's Q2 net income and EPS exceeded Wall Street estimates, but revenue fell short of projections.

-Circle's stock price initially rose by about 7% immediately after the earnings announcement, then reversed course and fell by about 3% in pre-market trading.

-Mizuho maintained its target price of $45, citing a decrease in USDC circulation and on-chain transaction volume.

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