Circle (CRCL): Initiating Coverage with an Underweight Rating as Valuation Pushed Outside Our Comfort Zone

We see Circle as well positioned in the nascent stablecoin market, where digital cash use cases are quickly developing. Circle and USDC have an early-mover advantage in what has been a winner-takes-most market, driving USDC market capitalization to ~$61bn. Use cases include stablecoins as digital cash in the cryptocurrency markets and digital dollars as a store of value outside the U.S. We see use cases developing in cross-border and retail payments. We think highly of the Circle management team and are confident in the outlook for outsized stablecoin and USDC growth. However, we see Circle’s market capitalization elevated, and we thus initiate coverage with an Underweight rating.