Summary Circle's IPO has been spectacular, with shares soaring 7x in weeks, but the current valuation is extremely stretched and unsustainable. The GENIUS Act boosts stablecoin legitimacy, yet tangible business benefits for the Company are likely years away, not immediate. CRCL faces intense competition from fintech giants and established stablecoins, as well as an eroding transparency advantage if regulation passes. Despite Circle's strong fundamentals, I rate it a Sell due to excessive valuation, competitive risks, and lack of near-term catalysts. A few weeks ago, Circle Internet Group ( CRCL ) made a huge splash in the US equity market with an unbelievable IPO. The stock was priced at $31, but opened much higher than that on the day. Less than a month later, the stock is trading $217 as I write this, 7X its IPO price. The run Circle has had in the span of a couple of weeks is nothing short of breathtaking, and it can be easy to get caught up in missing a move like that. However, while the future certainly looks bright for Circle, I'm struggling with the valuation after this parabolic run. What is Circle? Circle is a global fintech company that looks to facilitate global commerce through stablecoins for payments, trade, and other financial applications. It operates a widely used stablecoin network through USDC and EURC. Investor website Circle's business was perceived to have gained an enormous amount of additional legitimacy last week when the Senate passed the GENIUS Act , which is now pending in the House. Should it become law - which it certainly appears it will at this point - stablecoins would go from a niche area of finance to regulated and transparent. The bill seeks to provide legal guardrails basically for stablecoins, which includes full reserve backing by US dollars and US Treasury debt, as well as monthly audits and consumer protections. Such a framework would add legitimacy for Circle and its competitors, and that's a big reason why the stock has absolutely exploded higher. Now, the benefits of such a framework in terms of additional users/revenue/earnings is likely still years away, but the potential is there to be sure. If consumers and businesses feel better about using stablecoins safely for their various financial needs, Circle's business stands to be a significant beneficiary. The question then becomes, what is that worth? As it turns out, as of now, quite a lot. StockCharts The chart of this stock is unlike most anything I've seen. The initial bars don't look that far away from Wednesday's close, but the scale on the right side of the chart shows the magnitude of what has occurred. Even just the trading range on Wednesday alone (~$51 per share) was more than the actual IPO price ($31 per share). It's extraordinary, to say the least. Volume has been very high, but I will say that I'm skeptical. This kind of move where a stock is gapping up and running higher all day is impossible to maintain. If you've owned Circle at all during this period, you've probably done quite well. The problem is that the odds are that an almighty correction is probably incoming. While this is not a short squeeze, that's how the stock is behaving. When we get short squeezes, you get gaps and then massive buying throughout the day. The stock goes higher than anyone thinks it can. Then it ends. I don't know if today is the day the Circle parabolic run ends, or if it's a week or two or three from now, but it will, and it will probably be swift and ugly. This is unavoidable, as the slope of this move higher is simply not possible to maintain. The higher it goes, the more likely a massive crash becomes. Attempting to Value Circle Amidst Uncertainty The thing is that, unlike a lot of IPOs, Circle actually makes quite a lot of money. TTM EPS is just over $2 per share , and the balance sheet is in amazing condition. This company is for real, and I don't doubt that Circle stands to make a huge amount of money in the coming years. The uses cases are compelling. There's the obvious payments infrastructure , allowing access to the value of the US dollar through USDC, and even trading services . Circle is looking to become a one-stop shop for all things stablecoin, and it certainly appears it is well on its way. The problem is that there are huge competitive risks. The things Circle is doing aren't necessarily competitive advantages, as any other fintech could do basically the same things Circle is doing and building. Nothing is stopping big players like PayPal, MasterCard, Visa, or others in the space from building their own stablecoin network just like what Circle is doing, or acquiring one. We've seen time and again throughout history where an upstart finds a different way to do something, the big existing players can often just buy their way out of a difficult situation. That's a risk for Circle. Tether is a massive competitive risk to Circle, as is Binance Coin . Both of these coins have a much larger circulation than USDC does at the moment. Could that change? Of course, as anything is possible. It's also possible they continue to grow and USDC doesn't. A further risk is that consumers and businesses just don't have a broad interest in using stablecoins. Just because they become regulated and more transparent, that doesn't necessarily drive demand. Making the assumption that enormous numbers of consumers and businesses will uproot their entire financial lives for the sake of stablecoins is not a call I'm willing to make at the moment. Circle has built itself and its reputation around transparency through reserve attestations and other steps that help consumers and businesses feel safe about using USDC. The interesting thing about the GENIUS Act is that if the entire industry becomes more transparent and accountable, that advantage for Circle goes away. The stock is trading for about 110X TTM adjusted earnings today, and while earnings growth has been very strong, and should remain so, I feel like "priced for perfection" is a bit too tame of a description for the valuation. Shares are at ~30X TTM revenue, which again is difficult to justify. Here's a look at GAAP TTM EPS for Circle and some larger fintech players. GAAP EPS is not the perfect metric, but it gives us an idea of where the bigger players trade. Seeking Alpha Visa and MasterCard are in the mid-30s in terms of TTM PE ratio, while Block and PayPal are both at ~15. Circle is sort of trying to replace what Visa and MasterCard do, so if that ends up being the case, let's say it gets a premium valuation to those two at ~50X EPS. Today's price implies forward EPS of ~$4 at that valuation, which is double what it did in 2024. Nothing has fundamentally changed about Circle's business just because one branch of the US government passed a bill on stablecoins. It might at some point, but nothing has changed for now. Circle, in my view, has taken all of the perceived benefit at once and therefore, I have no clue what catalyst could possibly exist today or for the next few months that would offer additional upside. I have no doubt Circle's future is bright. I also have great concern about the competitive landscape as outlined above, and about the implied growth of the valuation. I'm initiating at a Sell rating, but note that I have zero intention of trying to short this thing. With the FOMO frenzy occurring at the moment, there is no limit to how high this can go. Signs of a top are likely to include a candle where we get a new high that fizzles in the afternoon and closes near the low. For now and the longer-term, Circle would need to be much cheaper before the risk/reward favored the bulls.