Mizuho downgrades Circle on competitive threat from new rival stablecoin

Investing.com -- Mizuho Securities downgraded Circle Internet Group, the issuer of the USDC stablecoin, to Underperform from Neutral and trimmed its price target to $50 from $85, flagging competitive threats from a newly launched rival stablecoin that could undercut Circle’s core revenue model.

The key catalyst behind the move is the launch of Open USD (OUSD), a dollar-pegged stablecoin unveiled June 30 by Open Standard, an independent, consortium-governed entity backed by more than 140 firms including Mastercard, Stripe, Coinbase and BlackRock.

Mizuho analyst Dan Dolev said Open-USD’s "pass-through model to distributors," combined with its scale and likely compliance with the GENIUS Act, "could fundamentally alter CRCL’s business model, which relies on retaining a large portion of the treasury yield to drive revenues."

Under Circle’s current structure, USDC operates on the so-called float-capture model, with Circle collecting 100% of reserve income and retaining a blended roughly 38% after revenue-sharing with distribution partners including Coinbase and Binance. Open-USD inverts that approach, keeping only a small management fee for itself while routing "nearly all reserve income" to its distribution partners, on the premise that issuance alone is not a meaningful revenue driver.

Dolev also flagged Circle’s revenue-sharing agreement with Coinbase, its largest distributor, which is expected to renew in August. He said Coinbase’s potential endorsement of Open-USD "could boost its leverage" in that renegotiation.

As a result, Mizuho raised its assumption for Circle’s distribution and transaction costs in fiscal 2027 to 73% of revenue from 64%, cutting its 2027 adjusted EBITDA estimate to $699 million from $1.093 billion previously, a figure the firm said is roughly 25% below Wall Street consensus of $941 million.

While Mizuho now expects higher interest rates in 2027 than in its prior model, "this is not enough to offset potential pricing compression, which we believe could weigh on medium-term profitability," Dolev wrote.

On valuation, the analyst modeled average USDC in circulation reaching approximately $126 billion in 2027, implying reserve income of about $5.058 billion. While Circle’s peer group — Visa, Mastercard, Coinbase and Robinhood — trades at an average of roughly 20x EBITDA, Mizuho applied a multiple of about 17x, a three-turn discount to peers, citing USDC’s slowing market-cap growth and increasing stablecoin competition.

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