But Circle is currently richly priced….
The cryptocurrency world is buzzing with excitement, and Circle Internet Financial (NASDAQ: CRCL), the issuer of the USDC stablecoin, is at the heart of it. On June 17, 2025, the U.S. Senate passed the GENIUS Act, a landmark bill that promises to reshape the stablecoin landscape. For Circle, this legislation could be a game-changer, potentially turbocharging its growth and making its stock a hot topic for investors. But with the stock trading at $178—well above its calculated intrinsic value—does this newfound optimism make Circle a buy? In this deep dive, we’ll analyze Circle’s financial health, valuation, debt structure, and growth projections post-GENIUS Act to determine whether it’s time to jump in or proceed with caution.
The GENIUS Act: A New Era for Stablecoins
The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025 is a pivotal piece of legislation. It establishes a regulatory framework for stablecoins—cryptocurrencies pegged to stable assets like the U.S. dollar—by requiring issuers to back them with liquid assets, such as cash and short-term Treasury bills. The bill also opens the door for banks, fintechs, and retailers to adopt stablecoins while prohibiting claims of government backing or FDIC insurance.
This clarity is a big deal. Stablecoins have long operated in a regulatory gray zone, deterring mainstream adoption. With the GENIUS Act, the $260 billion stablecoin market is poised for “explosive growth,” according to Reuters. For Circle, the second-largest stablecoin issuer with USDC’s $60 billion circulating supply, this could mean a surge in demand from institutional and corporate users, boosting revenue and market share.
Market Reaction: Circle’s Stock Soars
The market didn’t waste time reacting. On June 18, 2025, Circle’s stock surged 6% after the bill’s passage, reflecting investor confidence, as reported by Investopedia. This follows an already impressive run since Circle’s IPO on June 5, 2025. Priced at $31, the stock opened at $69 and hit $115 within days—a 167% gain, per Business Insider. Circle’s CEO, Jeremy Allaire, fueled the optimism, calling the GENIUS Act “genius” in a post on X, highlighting its potential to unlock growth.
But with such a meteoric rise, is Circle’s stock overvalued, or does the GENIUS Act justify the hype? Let’s break it down with a detailed financial analysis.
Valuation: Is Circle Priced for Perfection?
To gauge Circle’s fair value, we applied two time-tested valuation methods: the Buffett Valuation Method, inspired by Warren Buffett’s discounted cash flow approach, and the McGrew Valuation Method, which adjusts growth rates for dynamic companies. Using financial data from Circle’s quarterly reports, here’s what we found.
Buffett Valuation Method
- Free Cash Flow (FCF): Circle’s trailing twelve months (TTM) FCF as of Q1 2025 was $282.1 million, used as a proxy for 2024.
- Growth Rate: A 3-year FCF CAGR of ~242% classifies Circle as a growth stock, so we applied a conservative 10% growth rate for 10 years.
- Projections: FCF grows from $282.1 million to $731.7 million by Year 10.
- Terminal Value: Using a 2.5% perpetual growth rate and 8% discount rate, the terminal value is $13.6 billion.
- Present Value: Discounting FCFs and terminal value yields a total intrinsic value of $8.82 billion.
- Per Share: With 222.5 million shares outstanding, the intrinsic value per share is $39.62.
- Margin of Safety: Applying a 25% margin, the safe buying price is $29.72.
McGrew Valuation Method
Given Circle’s high growth, the McGrew method used the same 10% growth rate, resulting in an identical intrinsic value of $39.62 per share and a safe buying price of $29.72.
Valuation Table
| Stock Ticker | Valuation Method | Intrinsic Value per Share | Price with 25% Margin of Safety | Last Closing Price | Valuation Status |
|---|---|---|---|---|---|
| CRCL | Buffett Valuation | $39.62 | $29.72 | $178 | Overvalued |
| CRCL | McGrew Valuation | $39.62 | $29.72 | $178 | Overvalued |
Takeaway
At $178, Circle’s stock is trading 349% above its intrinsic value, signaling significant overvaluation. This premium likely reflects market enthusiasm for the GENIUS Act and Circle’s growth potential, but it raises red flags for value investors.
Debt Analysis: A Fortress Balance Sheet
Circle’s debt profile strengthens its investment case. As of Q1 2025:
- Total Debt: $37.4 million, all long-term, down 96% from $928.2 million in Q4 2021.
- Debt-to-Equity Ratio: A mere 5.02%, indicating minimal reliance on debt.
- Interest Coverage Ratio: 269.17, with annualized EBIT of $360.7 million dwarfing interest expenses of $1.34 million.
- Net Debt: Negative $811.2 million, thanks to $848.6 million in cash reserves (excluding $60.4 billion in restricted cash).
- Cash Flow Support: Annualized operating cash flow ($226.4 million) and free cash flow ($179.7 million) could cover the debt in months.
This low-debt, high-liquidity profile positions Circle to weather market volatility and invest in growth without financial strain.
Growth Projections: Skyrocketing Potential with Risks
The GENIUS Act is a catalyst for Circle’s growth. Analysts are bullish, with some projecting the stock could hit $300 per share, driven by:
- Market Expansion: Stablecoins are becoming “de facto digital dollars,” per Forbes, with applications in remittances, payments, and DeFi. The market’s growth could significantly boost USDC’s circulating supply.
- Revenue Growth: Circle earns “reserve income” from yields on USDC’s cash reserves. Increased adoption could amplify this revenue stream.
- Institutional Backing: ARK Investment Management’s $150 million stake at IPO signals confidence, per Reuters.
However, risks loom:
- Overvaluation: Forbes warns the stock could drop to $20 if sentiment sours or regulatory hurdles emerge.
- Interest Rate Sensitivity: Revenue depends on reserve yields, which could falter if rates decline.
Is Circle More Buyable Now?
The GENIUS Act undeniably makes Circle more attractive. Regulatory clarity positions USDC for wider adoption, and the market’s 6% surge post-bill reflects this optimism. Circle’s fortress-like balance sheet—low debt, ample cash—further bolsters its appeal. Yet, the stock’s $178 price, far above its $39.62 intrinsic value, suggests it’s priced for perfection.
For growth-oriented investors, Circle offers compelling upside, especially if it capitalizes on the stablecoin boom. But value investors may hesitate, given the overvaluation. Short-term volatility, driven by crypto market swings and regulatory developments, is another factor to watch.
Conclusion: A Promising but Pricey Opportunity
Circle stands at a crossroads. The GENIUS Act has unlocked a path to explosive growth, and its financial health is rock-solid. However, its lofty valuation demands caution. Investors should weigh the long-term potential against near-term risks, possibly waiting for a price correction closer to intrinsic value. For now, Circle is a stock to watch closely, with the stablecoin revolution just beginning.
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