Analysts question the payment prospects of stablecoins, and Circle's price-to-earnings ratio of up to 180 raises concerns.
Written by: Li Xiaoyin, Wall Street Insights
"Cathie Wood" reduces her stake in Circle, cashing out over $300 million.
According to media reports on Wednesday, renowned investor Cathie Wood's Ark Investment Management sold approximately 1.5 million shares of Circle stock over the past four trading days, valued at about $333 million.
Analysts generally believe this is a normal operation for Ark to take profits.
Wall Street Insights previously mentioned that for a long time, Ark has been known for its firm bets on cryptocurrencies and disruptive technologies. As one of the most active institutional supporters of Bitcoin, Wood predicted earlier this year that Bitcoin's price could reach $1.5 million by 2030.
As the issuer of the second-largest stablecoin, USDC, Circle's stock price has soared from the issuance price of $31 to a peak of $263.45 since its listing on June 5, an increase of nearly 750%, with the company's market capitalization reaching $50 billion, placing it among heavyweight players like Coinbase and Robinhood.
On the first day of Circle's listing, Ark Investment made a significant purchase of 4.5 million shares, with a holding value of about $373 million. With Circle's stock price rising sharply, Ark likely recouped most of its initial investment cost through this reduction.
On Tuesday, Circle's stock price fell by 8.1%, briefly interrupting its upward trend.
Ark Investment significantly profits and reduces its stake
According to media calculations, Ark Investment Management's three ETFs collectively reduced their holdings by about 1.5 million shares of Circle stock.
Among them, the flagship product ARK Innovation ETF (ARKK) sold 1.2 million shares, with assets totaling $6.5 billion. The ARK Next Generation Internet ETF (ARKW) and ARK Fintech Innovation ETF (ARKF) also followed suit in reducing their stakes.
However, Ark remains the eighth-largest shareholder of Circle.
Bloomberg Intelligence ETF analyst Athanasios Psarofagis stated:
"It is not uncommon for Ark to sell when they have doubled their investment in less than a month as the stock price rises."
Strategas Research senior ETF analyst Todd Sohn pointed out:
"Taking profits is a natural part of Ark's strategy. The more important question is if they completely exit, it could trigger a repeat of the Nvidia situation."
In 2023, Wood had sold out of Nvidia stock when its price surged, drawing market attention.
Concerns over the payment prospects of stablecoins and high valuations
Circle's stock price has continued to rise since its listing, closing at a historic high of $263.45 on Monday. This makes Circle one of the most notable cryptocurrency-related company listings since Coinbase's direct listing in 2021.
However, analysts have differing views on Circle's continued upside potential. Jefferies analyst Trevor Williams stated in a report on Monday:
"We are highly skeptical about whether stablecoins can become a relevant payment method in the U.S. The current card-based payment systems are convenient, secure, and rewarding, while stablecoins may lead to a poor consumer experience and lack new discounts or reward mechanisms."
He added that the appeal of stablecoins to U.S. consumers may be limited to serving as an entry and exit point for cryptocurrency transactions.
Michael Lebowitz, a portfolio manager at RIA Advisors, also stated that stablecoins are more like providing money market fund-like services for cryptocurrency traders rather than being true alternatives like Visa or Mastercard.
He believes that the impact of stablecoins on traditional payment giants may be overestimated.
Meanwhile, the significant rise in Circle's stock price has also pushed up its valuation level, with a price-to-earnings ratio nearing 180, far exceeding the S&P 500's forward price-to-earnings ratio of about 22.
Miguel Armaza, founding partner of Gilgamesh Ventures, believes that Circle's high price-to-earnings ratio can only be sustained if the company significantly improves its net profit margin and profitability:
"Any execution hurdles, unexpected regulatory setbacks, or macroeconomic headwinds could easily compress the company's valuation multiple, bringing Circle's valuation closer to that of its peers."
Additionally, data shows that Circle's freely tradable shares account for only 25%, while the average ratio for S&P 500 constituents is 95%. A low float means that stock prices can experience significant volatility, and if market sentiment reverses, it could exert downward pressure on the stock price.
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
