Investing.com -- Wall Street analysts took sharply divergent views on Circle Internet Group on Monday, with Morgan Stanley downgrading the stablecoin issuer to Underweight and slashing its price target, while TD Cowen initiated coverage with a Buy rating, arguing the company's broader financial infrastructure ambitions remain underappreciated.

Morgan Stanley cut its rating from Equal-weight to Underweight and lowered its price target to $38 from $106, citing slowing USDC growth, rising competitive pressures and concerns that Circle's transition toward transaction-based revenue will take longer and prove less profitable than the market expects. The firm reduced its USDC circulation forecasts by about 33% for 2027 and 44% for 2028, driving earnings estimates roughly 20% below Wall Street consensus for 2028.

The brokerage argued stablecoin usage remains heavily concentrated in crypto trading and transfers rather than payments, limiting the durability of USDC balances. It also warned that tokenized money market funds, tokenized bank deposits and consortium-backed initiatives such as OpenUSD could erode Circle's reserve-income model, while emerging payment opportunities such as agentic commerce remain too small to materially boost earnings.

By contrast, TD Cowen initiated coverage with a Buy rating and an $82 price target, saying investors are overly focused on Circle's reserve-income business while overlooking its evolution into a broader digital financial infrastructure platform spanning payments, treasury services, tokenized assets, interoperability and developer tools.

TD Cowen expects USDC circulation to grow at roughly a 31% compound annual rate through 2030 and believes fee-based revenue from products including the Circle Payments Network, Cross-Chain Transfer Protocol, StableFX and Arc will expand substantially faster than reserve income, reducing the company's dependence on interest rates over time.

The firm also pointed to regulatory clarity, institutional adoption and Arc's long-term optionality as potential catalysts, while acknowledging risks from lower interest rates, bank-issued stablecoins, OpenUSD, tokenized deposits and slower monetization of Circle's platform initiatives.