Circle stock plunges as concerns over falling interest rates overshadow strong revenue, earnings growth
Circle (CRCL) stock dropped as much as 10% Wednesday as investor concerns over falling interest rates outweighed the company's strong earnings and revenue growth, fueled by rising market share for its stablecoin issuance.
Circle reported roughly $740 million in total revenue and reserve income in its third quarter, up 66% year over year, surpassing Wall Street estimates of $707.3 million.
As the second-largest stablecoin issuer, Circle posted adjusted earnings of $0.64 per share, well above analysts' expectations of $0.20.
Circle generates most of its revenue from interest paid on the assets backing its stablecoin, USDC (USDC-US), primarily short-term Treasury bills. Management noted the company's reserve return rate fell 96 basis points to 4.15% during the quarter, a scenario Wall Street has been anticipating as the Federal Reserve began cutting interest rates this year.
Read more about Circle's stock moves and today's market action.
On Wednesday, Circle CFO Jeremy Fox-Geen pushed back against concerns that the company's main source of revenue could be squeezed amid expectations for falling interest rates next year.
"We're already in a rate-cutting cycle, and through that cycle we are delivering sustained growth," Fox-Geen told Yahoo Finance on Wednesday morning.
Circle's stablecoin market share rose to 29% last quarter, up from 28% the prior three months, while USDC circulation jumped 108% year over year, the company said.
"In many ways, we think falling rates are good for our business in the near term," Fox-Green added. "Falling rates lead to greater economic activity, more risk-taking, and increased investment."
The company has also been diversifying revenue through offerings like Circle Payments and its Arc blockchain platform, designed to boost on-chain economic activity. Over 100 companies are already testing Arc.
"CRCL's numerous new partnerships — including Brex, Fireblocks, Hyperliquid, and Visa — are expected to provide additional support to future results," Seaport Research Partners analyst Jeff Cantwell wrote on Wednesday following the results.
He also noted that management highlighted the potential for Arc to have its own native coin, calling it "ultimately bullish for CRCL." Cantwell maintained a Buy rating on the stock with a $280 price target.
Since its blockbuster IPO debut in June, Circle stock is up 180% as landmark legislation passed earlier this year paved the way for stablecoin adoption.
The shares, however, remain roughly 60% below all-time highs reached over the summer.
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