Should I Buy Circle Internet Group (CRCL)? Finance YouTuber Analysis

Joseph Hogue suggests that long-term investors can start building a position in Circle Internet Group (CRCL) despite its current high valuation at 4.6 times price to book. He notes that the valuation is much better than when he previously recommended against it, and while near-term performance depends on crypto regulation, the company is still expected to post 20% revenue growth. He also mentions the company's USDC stablecoin holds 24% of the market.

“Valuation is a hell of a lot better than when I recommended against this stock at $220 a share. It's still expensive at 4.6 times price to book for what's essentially just a bank stock, but long-term investors can start building a position.”

The YouTuber recommends buying Circle Internet Group (CRCL), noting that he previously advised against it at higher valuations. Now, below its IPO price, he sees it as good value. Circle is becoming the de facto stablecoin provider with significant market share and rapid growth in transactions and USDC circulation. He emphasizes valuing it as a bank, and its current price-to-book ratio is much more reasonable. The average analyst price target is $144, indicating 97% upside.

“Now it's down below the I IPO price. We can expand this out to the IPO price that was right around there. $180 per share uh last year and a half boomed up to $250. I come out negative because basically folks, this is a bank.”

The YouTuber is starting to recommend Circle Internet Group, noting that its shares are down 50% since its prior report despite strong growth in stablecoin payments and USDC circulation. He believes the stock is now in 'value territory' at 9.7 times sales, which is half the valuation when he previously recommended against it.

“At a market cap of $25.8 8 billion. The stock now trades for just 9.7 times on that price to this year sales basis, which is about half as expensive as when I recommended against the stock when it was trading above $200 a share.”

The YouTuber previously recommended against Circle at $213 due to high valuation, and while it's now at $125, he remains cautious. He views Circle primarily as a bank with limited profitability, as its main income comes from investing USDC deposits in low-yield treasuries. He anticipates profitability will decline as interest rates fall.

“I recommended it recommended against Circle at $213 a share on June 30th. Okay, so came out with that uh you know with that that video June 30th here. It was about $213 per share. I said it was just too expensive for what this really is because this is really basically just a bank, okay?”

The YouTuber is hesitant to buy Circle Internet Group despite its attractive 10x sales valuation due to near-term headwinds. These include insiders selling shares before the lockup period, weakening profitability as it offers more yield to distributors, and falling yields on treasury bills as the Fed cuts rates. He would reconsider if the stock fell closer to $110 per share.

“I would revisit Circle if it fell closer to $110 a share, about a $27 billion market cap. That would be about eight times next year's forecasted revenue, and make it more compelling on that growth story. But I can't recommend it just yet.”

Hogue advises avoiding Circle Internet Group, despite its potential in the stablecoin market, due to fundamental profitability issues. He notes that stablecoin companies primarily generate revenue from investing reserves in low-yield assets like US treasuries, limiting net income conversion. While the stock is less expensive than before, its 'growth stock' valuation is challenged by its bank-like operational model.

“It's not as ridiculously expensive as it was when I said to avoid it at $250 a share... But here profitability is always going to be the issue because these stable coin companies are very limited to how they make money by putting their money that you pay for those stable coins mostly in US treasuries and with a small kicker in those money markets and a few other investments.”

The YouTuber advises avoiding Circle Internet Group despite its recent IPO run, warning investors are 'diving into a pool with no water.' He highlights its low operating profitability of 10% and high valuations (727x P/E, 34x P/S) on only 15% revenue growth, suggesting that while stablecoin potential exists, the current price is unsustainable and investors should wait for a better entry point.

“But if you look at the actual numbers here, folks, you're going to see you're diving into a pool with no water. Looking into the prospectus filed with the SEC, we see Circle Posted revenue of $1.6 billion last year with costs of 1 billion and operating expenses that just under half a billion dollars.”