This week has not been kind to high-tech investors. Shares of Circle Internet Group (CRCL 4.59%) fell 20% as of this writing after market close on Nov. 13, due to a weak reaction to its latest earnings result. The stablecoin issuer is growing quickly, but investors fear the stock's upcoming lock-up period and how falling interest rates will impact its interest income.
Shares of Circle Internet Group have now round-tripped the price of its initial public offering (IPO) this spring, sitting at a price below $100 a share. Here's why investors are nervous about this company, even after fast Q3 earnings growth.
NYSE: CRCL
Key Data Points
Strong growth, lock-up period
On the whole, Circle's Q3 numbers looked strong. Total revenue grew 66% to $740 million, net income was positive $214 million, and USDC (the company's stablecoin) in circulation grew 108% year over year to $73.7 billion. So what caused investors to sell off?
Well, for one, a lot of the high-growth recent IPOs have fallen this week, a broad trend that could have impacted Circle's share price. Second, Circle's lock-up period for its IPO shares is ending this Friday. Lock-up periods usually lead to long-term private shareholders selling stock indiscriminately of price, which can lead to falling share prices in anticipation. This is a key reason why IPO stocks underperform the first year after going public.
Third, Circle Internet Group makes money through interest income on cash held for issued stablecoins, which it invests in things such as United States Treasury bonds. With the Federal Reserve lowering interest rates, Circle may face a headwind to its earnings in the future, which is causing investors to be bearish on the stock.
Combined, these factors have led to Circle Internet Group stock to reach an all-time low.
Image source: Getty Images.
Is Circle Internet stock a buy?
What's perplexing about Circle's stock drop is that it even raised guidance for the rest of 2025 regarding its other revenue category. However, it did increase its operating expense guide, which may have slightly spooked investors.
Either way, Circle Internet is a fast-growing company that is profitable. Last quarter, it generated $81 million in operating income, and while the IPO impacted its profitability from the first part of the year, this is a fairly simple business to understand. The more stablecoins it issues, the more it can generate net interest income on deposits, similar to a bank.
Circle Internet Group now trades at a market cap of $19 billion. If you are a believer in the growth of stablecoins, now could be a good time to scoop up some shares of this stock on the cheap.
