TOP STORY
🚀 Stablecoin Stock Circle Surges 675% Since IPO

😰 Last week, we covered the Israel x Iran conflict in the Middle East and the expected impact on the stock market, and since then, things have escalated, with the market dipping lower as uncertainty swirled over whether the US will get involved with Trump saying he will ‘decide in the next two weeks’.

📊 Across the indexes this week:

• The S&P 500 fell -0.6%

• The Nasdaq-100 fell -0.2%

• Bitcoin fell -1.4%

💣 As we know now, the US did get involved, with Trump tweeting that the US dropped “a full payload of BOMBS” on three nuclear sites in Iran. However, markets have not yet had a chance to react to the news as this occurred over the weekend.

🏦 The US Federal Reserve also decided to keep interest rates unchanged for the 4th time in a row on Wednesday (saying they’re worried inflation will pick up in the summer), which also played a role in the dip this week.

🔍 And while these are big stories, this week I want to take a little break from the ‘big picture’ and zero in on a new stock that has been absolutely flying lately - Circle Internet Group.

🚀 Since IPO’ing on June 5, the Stablecoin issuer Circle ($CRCL) is up a massive +675% to an over $20B valuation and is the #17 Most Watched stock on Blossom this week… so let’s take a look at what’s up with this company, what analysts are saying about it, and more…

⭕️ So, what is Circle?

🤔 First off - if you’re like me, this company may be one you’re just hearing about for the first time, so let’s take a second to look at what Circle is all about.

🪙 Stablecoin Revenues

🌐 According to its website, Circle is the ‘platform for global stablecoin finance’. Its main business is managing the stablecoin USDC, which is a cryptocurrency pegged to the US dollar and is the 7th largest crypto token overall.

💰 In 2024, Circle reported $1.68B in revenue, a +16% increase from 2023. Over 95% of Circle’s revenue comes from interest income on the reserves backing its USDC and EURC stablecoins.

⚙️ Infrastructure APIs

💹 While its core business is operating the USDC Stablecoin, Circle is also working to expand its software/API offerings, building programmable payments, FX settlement rails, and on-chain treasury tools - essentially trying to become the ‘Stripe for digital dollars’.

⭐️ While small now, many analysts point to this as the most exciting part of Circle’s business:

🏆 Massive Recent Win

👩‍⚖️ Part of the reason for the incredible stock surge this week was regulatory, with the US Senate approving a ‘milestone bipartisan stablecoin bill’ that many say represents a turning point for cryptocurrency regulation.

According to FAST Company, the new GENIUS Act establishes a regulatory framework for stablecoins, legitimizing the tokens and integrating them into the US economy.

While passed in the Senate, the bill still needs to be approved by the House, and some groups are still calling for ‘critical changes’.

Ok, now that we have a rough idea of what Circle is all about, let’s see what analysts are saying about the stock, but first a quick word from today’s sponsor State Street Global Advisors!

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TOP STORY CONT.
📈 Despite the Massive Gains, Some Analysts Say Circle Has More Room to Grow

🤔 So is Circle a buy? Or should you avoid it with a 10-foot pole? Well, it depends on who you ask. Here are two quotes from analysts this week:

🐻 So let’s take a look at both the bull and the bear case…

⭐️ Circle’s Growth Potential

🚀 Surge in Stablecoin Adoption:

The biggest argument for Circle is that the Stablecoin market still has much more room to grow. The market currently sits at $260B, and both analysts and even US Treasury Secretary Scott Bessent have suggested that the market could reach $2T as adoption grows with regulation:

⚙️ Opportunity As An API Infrastructure Play

As we already discussed, while over 95% of Circle’s business currently comes from Stablecoins, many see it playing a role as a key infrastructure player for fintechs as they integrate the blockchain into their core functions.

According to Trefis on Forbes, this (along with growth in stablecoins) gives Circle a clear pathway to 3-5x’ing revenue.

Seaport Global Securities Analyst Jeff Cantwell, one of the first analysts to initiate coverage of Circle, agrees the opportunity is massive:

😰 Circle’s Risks

⚠️ Interest Rate Risks:

Since most of Circle’s revenue comes from interest rate revenue, it’s particularly vulnerable to interest rate cuts. According to Sean Farrell, the Head of Digital Asset Strategy at Fundstrat, every 0.25% cut in interest rates slashes Circle’s earnings by $100M.

To offset this, Stablecoin adoption needs to grow 10% to offset each cut. And while the Fed hasn’t lowered interest rates in some time, two more cuts are expected by the end of 2025.

🚨 Overvalued compared to Coinbase:

On top of the interest rate risk, Circle also seems overvalued compared to peers like Coinbase. To put it into perspective:

• Coinbase ($COIN) has a market cap of $79B with $6.6B in revenue in 2024 (more than double the year before)

• Circle ($CRCL) now has a market cap of $58B with $1.7B in revenue in 2024 (only 16% up from the year before)

😳 Even more shocking, as we talked about when we covered Coinbase in May, Coinbase has an agreement with Circle where it gets a 50% revenue share of Circle’s interest income, so this valuation disconnect really doesn’t make any sense.

According to Circle’s IPO prospectus, the agreement with Coinbase will last until at least 2029.

As Sean Farrall, the Head of Digital Asset Strategy at Fundstrat puts it, if you value Coinbase’s Stablecoin revenues (from its revenue share with Circle) at the same multiple as Circle right now (at a 46x multiple on revenue), it implies that the rest of Coinbase’s business is only worth a 2.5x multiple on revenue (which is very low).

🚨 To me, this is a pretty big signal that Circle is overvalued, or at the very least, Coinbase is undervalued.

🤔 From my research, it seems to me that if you’re bullish on the stablecoin market, then Coinbase would be much better value as an investment (unless you’re really bullish on Circle’s potential as an infrastructure player) but as always, I’m very curious on what you guys think so please share your thoughts on my discussion post on Blossom!

ALSO IN THE NEWS
🗞️ Other Key Headlines this Week

📈 Oscar Health Surges 53% As Retail Investors Pile In

• Oscar Health ($OSCR) rocketed up +53% over the past week, including a +13% jump on Friday.

• The stock jumped despite no news to report, largely driven by social media, including a post from Ruth Capital highlighting the company’s first-quarter free cash flow of $1 billion. This has led many to call OSCR the ‘next meme stock’.

• Some of the hype around the stock is driven from the fact Oscar Health’s co-founder is Joshua Kushner, the brother of Jared Kushner, U.S. President Donald Trump’s son-in-law.

• Many analysts beleive the stock is overvalued, now at a 76x Price-earnings ratio compared to a 24x average ratio across the S&P 500.

☀️ Solar Stocks Fall As Much As 40% As the Senate Proposes to Phase Out Tax Credits by 2028

• A Senate bill proposes phasing out key solar and wind tax credits by 2028, accelerating the rollback originally set by the Inflation Reduction Act.

• The bill would cut renewable energy credits to 60% by 2026, then phase them out entirely by 2028

• Popular solar stocks like SunRun ($RUN), Enphase ($ENPH), and SolarEdge ($SEDG) fell as much as -40%, with investors fearing higher project costs and reduced incentives.

• Solar firms were already grappling with weak U.S. residential demand, so this is another big blow to the struggling industry, with Invesco’s Solar ETF ($TAN) now down -74% from 2021 highs.

⭐️ Reddit Stock Jumps 25% After Announcing New AI Ad Tools

• Reddit ($RDDT) surged +25% after unveiling new AI-driven ad products: Reddit Insights and Conversation Summary Add-ons.

• The new tools, powered by its "Reddit Community Intelligence" engine, structure insights from over 22 billion posts and comments to give advertisers real-time social listening and incorporate positive user content into ads

• Advertising made up 91% of Reddit’s $392M in Q1 revenue, making these tools key to its monetization strategy.

• Early results show ads using Conversation Summary Add-ons have a 19% higher click-through rate than standard ads.

🤖 Meta Ramps Up AI Spending Binge to Build the ‘AI Dream Team’

• Meta ($META) is accelerating AI investments, including a $14.3B stake in Scale AI and hiring its founder Alexandr Wang along with key staff.

• The company is reportedly also bringing on ex-GitHub CEO Nat Friedman and investor Daniel Gross, and previously attempted to acquire Safe Superintelligence and Perplexity

• CEO Mark Zuckerberg boosted Meta's capex forecast to $64 - $72B this year, after it’s Llama 4 model underwhelmed, pushing the company to overhaul its AI leadership and compete with Google, OpenAI, and Anthropic.

• Investors have responded positively, with the stock up +7.4% this month and +38% over the past year.

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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