ARK Invest CEO Cathie Wood has defended her continued purchases of Circle shares following a 42% decline in the stock over a one-year period. Wood argued that Wall Street analysts, who built their careers on traditional payment giants like Visa and Mastercard, fail to understand Circle's role as a financial disrupter.
Circle issues USDC, a digital dollar backed by cash and short-term US government debt. The asset is now the largest cryptocurrency holding in ARK Invest's flagship fund, totaling 3,931,968 shares valued at $329 million, which accounts for 5.14% of the portfolio.
Wood's comments responded to data tracking the performance of Visa, Mastercard, and Circle over a year. While Visa and Mastercard posted gains of approximately 5% and 1%, respectively, Circle experienced a 42% drop. Wood compared this dynamic to the historical trajectories of Visa and Mastercard, noting that technological shifts are now reshaping the payments sector.
Wall Street coverage of Circle reflects a wide division in valuation methods and expectations. Among 21 analysts covering the stock, 13 recommend a buy or strong buy, five suggest a hold, and three rate it a sell. Price targets further highlight the uncertainty, with the most bullish target at $173 and the most bearish at $37, while the average target sits at $98.61.
Analysts face challenges in establishing a shared valuation framework due to factors such as fluctuating interest rates impacting reserve earnings, the speed of digital dollar adoption, and growing competition. Competitors include Open USD, a rival stablecoin consortium comprising over 140 firms.
Despite reporting revenue growth of about 37% and turning a profit following a second-quarter earnings surprise in August, Circle's market value has faced downward pressure, reflecting ongoing debate over how to price the digital asset issuer.
