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Dragonfly Investor: Rate Cut a Disaster for Circle, Expected to Lead to Significant Decline in Revenue and Profit
Summary: In a recent post, Dragonfly investor Omar discussed the impact of the rate cut on Circle, stating: "The rate cut is a disaster for rate-sensitive companies like Circle: a 100 basis point rate cut will result in a $618 million decrease in annual total revenue, a $303 million decrease in gross profit, and a 3.3 ...
In a recent post, Dragonfly investor Omar discussed the impact of the rate cut on Circle, stating: "The rate cut is a disaster for rate-sensitive companies like Circle: a 100 basis point rate cut will result in a $618 million decrease in annual total revenue, a $303 million decrease in gross profit, and a 3.3 percentage point drop in profit margin; from a valuation perspective, it will further increase the valuation of the company, already at a high 42 times EV/gross profit ratio, to 60.4 times (a premium of about 50%)."
To offset the impact, Circle will need to increase the circulation of USDC by $28 billion (equivalent to 44% of the current $64 billion scale) to maintain the status quo. With the rate cut already a certainty, this explains why there was a massive $1.5 billion stock sell-off yesterday, and also reveals why Circle is eager to advance new products that can generate trading flows (CPN and Circle Chain)."
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Link: Dragonfly Investor: Rate Cut a Disaster for Circle, Expected to Lead to Significant Decline in Revenue and Profit [Copy]
