Circle stock drops 10% after downgrade, margin squeeze

Circle's stock fell 10% after a downgrade and margin concerns tied to USDC. Regulatory uncertainty and the Drift Protocol exploit added pressure, extending a broader downtrend and raising concerns for future earnings.

Circle Internet Group's stock dropped nearly 10% to close at $85.10 after Compass Point downgraded it from neutral to sell and cut its price target. The downgrade was driven by concerns over a potential margin squeeze in Circle's core USDC business. Recent growth has shifted toward lower-margin distribution partners such as Sky, Binance, and Ethena, reducing Circle's share of interest income from USDC reserves. Negative market sentiment also weighed on the stock, fueled by ongoing regulatory uncertainty around stablecoins in the U.S., a recent exploit of Drift Protocol, and a notice of a possible class-action investigation, despite Circle not being directly involved in the exploit. This decline extends a broader downward trend, with shares down nearly 24% over the past month and about 43% over the past six months. Analysts expect these pressures to negatively impact upcoming earnings, with Q1 EBITDA and fiscal 2027 projections below Wall Street consensus.