Summary Circle's USDC stablecoin is uniquely positioned, gaining traction with major partners like Shopify, Walmart, and Amazon for payments and loyalty programs. The company’s revenue model is robust, earning nearly all income from interest on USDC reserves invested in short-term U.S. Treasuries. Regulatory clarity from the Genius Act boosts Circle’s credibility and growth prospects, mandating strict reserve and audit requirements for stablecoins. Despite all this, valuation does not provide a margin of safety for investment. Investment Thesis I recommend selling Circle ( CRCL ) shares. The company's stock has performed incredibly well since its IPO on June 5, and despite its extremely interesting and disruptive business model, I have doubts about the attractiveness of the investment. Even using relatively optimistic assumptions, the valuation through the five-year DCF model indicates a significant downside. In my view, this asset should be on a watch list to monitor possible price drops. Corporate Profile Circle was founded in 2013 by Jeremy Allaire and Sean Neville and initially focused on peer-to-peer payments before moving into stablecoins. Circle is the issuer of the USDC stablecoin , which is already the second-largest dollar-backed stablecoin in the world, with a 30% market share and competing with Tether, the issuer of the USDT stablecoin . Total Stablecoin Market Cap (USDT, USDC, DAI, FDUSD) (Coinglass) The company's ability to integrate with traditional financial systems in a scalable way has attracted the attention of traditional payment networks and institutional investors. But after all, how does the company make money? In short, when an investor wants to buy a unit of USDC, they send $1 to Circle. The company invests this dollar in short-term U.S. government bonds, T-Bills, which yield interest. In 2024, the company reported revenues of $1.68 billion, 99% of which came from interest backed by USDC. How the company makes money (W Fintechs) IPO This has allowed the company to move beyond the cryptocurrency space and launch an IPO. The company's IPO took place on June 5, 2025, and was a milestone for the industry, with a meteoric performance in the first few days of trading. The company's shares went from $31 per share to $270 in a few days. Let's now analyze the reasons behind such optimism. Price Return (SA) First Reason - Applications Can Reshape The Sector One of the catalysts for the good performance is that the company has managed to position USDC in a very unique way. Circle is developing, through partnerships with payment processors such as Fiserv , a solution for enabling stablecoins in financial institutions. Shopify has launched USDC payments recently. Walmart and Amazon are testing stablecoin-based systems for ATMs and loyalty programs. If these projects are successful, USDC could be a core payments infrastructure. The benefits will cascade, such as reduced transaction costs and increased operational efficiency. Second Reason - Expansion Includes Corporate Treasury Market The bold growth strategy also targets the institutional client . Stablecoin solutions can automate complex financial transactions, as well as provide liquidity management tools, cross-border capital flows and automated payments. Third Reason - The Impact of Genius Act The U.S. Senate has passed the Genius Act , which represents a broader effort to regulate the stablecoin space. The legislation specifically requires each stablecoin to be backed 1:1 by dollars or liquid assets, with mandatory reserve disclosure and audits. Non-financial companies are prohibited from issuing digital currencies, and it protects consumers with strict rules. The Genius Act also favors T-Bills , as Tether and Circle invest heavily in these securities to maintain parity with the dollar. Stablecoins represent an estimated 3% of the T-Bills market, and demand could grow exponentially. Financial Analysis According to Bernstein , increased adoption and supply of USDC should drive Circle's revenue to grow at a CAGR of 47% between 2024 and 2027, which is in line with the consensus . Due to the proximity of the projections, I will use them in the valuation discussion ahead. Consensus Revenue Estimate (SA) Adjusted EBITDA is expected to grow at a CAGR of 71% over the same period. Circle is expected to maintain a 30% market share in the stablecoin market. As of now, USDC holds around 25% market share in the stablecoin market. With this information in hand, we will analyze the valuation. Valuation For the valuation, I used a five-year DCF model using a revenue exit multiple. In my view, it is the best method to evaluate companies with strong growth and in transition to profitability. I adopted assumptions aligned with the SA consensus and Bernstein. I projected a CAGR of 42% for revenue between 2024 and 2029, and an EBITDA margin going from 10.5% to 26.2%. I reduced the CAGR from 47% to 42% because I will be making a five-year projection and not a 3-year projection, allowing for a more conservative view. The WACC used was 10.5%, reflecting the risk of a company in a volatile sector. The terminal multiple was 4.8x revenue, consistent with rapidly expanding fintechs in my view. 5Y DCF Revenue Exit (The Author) The result points to a fair value of $141.79, a downside of 26.4% compared to the current price of $188.77. In my view, despite the interesting thesis and expressive growth, the market is overestimating the business' potential. Based on this analysis, I recommend selling Circle shares. We should also remember that the business is sensitive to interest rates. I would like to point out that a catalyst for the shares to return to fair value could be the beginning of an interest rate cut by the Federal Reserve. The company itself has already indicated that a 1% drop in interest rates would reduce revenue by up to $441 million . Potential Threats To The Thesis As risks to the bearish thesis, we are disregarding any business diversification. Currently, a major risk is the excessive concentration of revenue, if the company manages to diversify into even more promising businesses, the thesis changes completely. Unlike Tether, which is not a publicly traded company, Circle offers greater transparency, especially in the stablecoin environment regulated by the Genius Act, which can be a differentiator for investors. The stock's momentum is very strong, and we have the famous FOMO , or fear of missing out. This behavioral bias can make investors buy the company's shares and drive prices higher and higher. Finally, in the last 12 months, a basket of unprofitable tech companies outperformed the S&P 500, possibly reflecting the FOMO mentioned above. The thesis is complex and investors should analyze it carefully. Low-Quality Baskets Show Significant Outperformance (Bloomberg) The Bottom Line Circle is the only publicly traded company with a business model that is 100% responsive to the stablecoin environment. The company's disruption and potential can be seen in its stock performance after the IPO. However, the main quality of an investor should be to acquire shares of companies that offer a good risk-reward ratio. In this sense, the five-year DCF model indicates a significant downside of 26.4%. Based on this analysis, I recommend selling Circle shares. Nonetheless, I suggest that the investor put the company's shares on a watch list, as a sharp drop in the shares could provide an attractive entry point.