Investing.com - Baird has lowered its price target on Circle Internet Group (NYSE:CRCL) to $110.00 from $144.00 while maintaining a Neutral rating on the stock. Circle’s shares currently trade at $86.30, having fallen 12.2% from the previous close of $98.30, reflecting a steep 13.7% decline over the past week according to InvestingPro data.
The price target reduction follows Circle Internet Group’s third-quarter results, which Baird described as "good" despite the stock pulling back Thursday. The firm noted that risk/reward for the stock is becoming more attractive given its long-term potential.
According to Baird, the stock decline appears related to several factors, including expectations that distribution costs will increase in the fourth quarter. This cost increase implies approximately 35% gross margin after maintaining 38-40% margins through the first three quarters of the year. InvestingPro data shows Circle’s gross profit margin for the last twelve months stands at just 4.12%, highlighting ongoing profitability challenges.
Additional factors affecting the stock include expectations that "Other revenue" will decline sequentially, with Baird noting that subscription revenue appeared to have "lumpy/upfront fees" that boosted the third quarter. The firm also pointed to a lock-up expiration scheduled for Friday as another potential pressure point.
Despite these concerns, Baird expressed positive sentiment about progress on the company’s CPN initiative, which has reached approximately $3.4 billion in annualized volume with 500 partners in the pipeline, stating they are "becoming more interested" in the stock.
In other recent news, Circle Internet Group reported robust third-quarter financial results, surpassing analyst expectations. The company achieved revenue of $740 million, representing a 66% year-over-year growth, and an adjusted EBITDA of $166 million, exceeding consensus estimates by 5% and 26%, respectively. Additionally, Circle reported an earnings per share (EPS) of $0.64, significantly beating the forecast of $0.34, marking an 88.24% surprise. Despite these strong earnings, Circle’s stock experienced a decline, influenced by investor concerns over future guidance and market conditions. Analysts from Mizuho noted growth challenges for Circle, highlighting concerns about the company’s fiscal year 2025 guidance. However, Bernstein maintained an "outperform" rating for Circle, even as shares dropped due to rate cut fears. These developments underscore the mixed sentiment surrounding Circle’s future performance despite its solid third-quarter results.
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