Circle Stock Rocketed After the IPO. Wall Street Disagrees on What Happens Next.

Circle stock received a rare Underweight rating from one of its own IPO underwriters. (NYSE)

Circle Internet Group stock hasn’t behaved normally since the June 5 initial public offering.

As of Friday’s close, shares of the stablecoin issuer have risen more than 450% to $180.43 from their IPO price of $31. The stock has swung double-digit percentages—both up and down—on 10 of 16 trading sessions.

Entering July, investors can’t quite seem to agree how real Circle meteoric rise has been and whether the stock has more room to climb.

Wall Street can’t either. Several analysts initiated coverage of Circle on Monday, revealing a staggering range of opinions and price targets, including a rare Underweight rating from a lead IPO underwriter. Bulls and bears now have plenty of ammo to make their respective cases, but undecided investors awaiting a clear consensus will have to wait a bit longer.

One of the bulls is Bernstein’s Gautam Chhugani, who assigned Circle stock an Outperform rating and a $230 price target in a research note. Circle’s USDC is the second-largest dollar-pegged stablecoin by market cap, and its distribution network, liquidity, and regulatory advantages will be difficult to replicate, Chhugani argued.

That head start could prove essential if, as a number of industry observers predict, stablecoins expand beyond cryptocurrency markets to become a facilitator for remittances, domestic banking, and maybe even retail payments. The global stablecoin supply has the potential to reach $4 trillion by 2035, Bernstein forecasts, up from roughly $225 billion today.

Circle also picked up an early compliance edge in June after the Senate advanced the Genius Act, which would establish a regulatory framework for stablecoins. The company’s main rival, Tether, would be considered a foreign issuer under the Genius Act, according to Chhugani, giving USDC an even greater share of the regulated stablecoin market.

“We view CRCL as an investor must-hold, to participate in the new internet-scale financial system built for the next decade,” Chhugani wrote.

But Circle’s solid footing in a growing market doesn’t make it an automatic buy, wrote J.P. Morgan analyst Kenneth B. Worthington in a research note Monday. Worthington presented the bear case, initiating coverage of Circle stock with an Underweight rating and an $80 price target—an implied 56% drop from Friday’s close.

As one of the lead underwriters in Circle’s IPO, J.P. Morgan’s Underweight rating may come as a surprise. But the stock’s sky-high valuation has “pushed outside our comfort zone,” Worthington wrote.

J.P. Morgan’s overall opinion of Circle was similar to Bernstein’s: The company has cornered a solid share of the “winner-takes-most” stablecoin market, and new U.S. regulations will make life easier for Circle and its partners across finance, payments, and retail. But investor enthusiasm, not fundamentals, has driven the company’s surge, Worthington argued.

“We think highly of the Circle management team and are confident in the outlook for outsized stablecoin and USDC growth,” Worthington wrote. “However, we see Circle’s current market capitalization elevated.”

Goldman Sachs, another lead IPO underwriter, split the difference between Bernstein and J.P. Morgan, issuing a Neutral rating for Circle stock. Analyst James Yaro’s $83 price target, however, is essentially the same as J.P. Morgan’s.

Circle merits a premium valuation even relative to the high end of peer crypto-adjacent companies like Coinbase Global, Robinhood Markets, and Interactive Brokers, Yaro argued.

“We see CRCL as a unique asset, as the only publicly traded pure play within stablecoins, a unique component of the crypto ecosystem, which lacks the direct price volatility related to crypto trading,” Yaro wrote.

But with a share price trading at around 145 times its projected adjusted earnings for the next 12 months, Circle’s valuation has grown too rich for Goldman’s liking. Its peers, Yaro noted, trade at less than a quarter of that premium.

Following the slew of research notes, Circle was flitting between a modest rise and a modest drop in afternoon trading. For shareholders used to double-digit daily swings, it’s a rather sleepy day at the office.

Perhaps the stock will calm down as we get further from the initial post-IPO frenzy—a development that would at least help analysts on Wall Street do their jobs. But even a calmer July will do little to settle the debate around Circle and its astronomical valuation.

For now, most onlookers seem to agree the company is an innovative first mover with the wind at its back. No one seems to agree where the stock will go next.

Write to Nate Wolf at nate.wolf@barrons.com