Shares of crypto bank Silvergate Capital (NYSE:SI) jumped on Wednesday, adding as much as 9%. As of 1:58 p.m. ET, the stock was still up 6.9%.
The catalyst that drove the crypto-friendly bank higher was an upgrade courtesy of a Wall Street analyst, as well as a wide-ranging recovery in the cryptocurrency market.
Michael Perito — an analyst with Keefe, Bruyette & Woods — upgraded Silvergate Capital to outperform (buy) from market perform (hold), while simultaneously assigning a $225 price target, according to The Fly. His new estimate would represent potential upside for investors of more than 74% over the coming year, compared with the stock’s closing price on Tuesday.
The analyst pointed to the recent sell-off, noting that it resulted in an attractive buying opportunity. He believes that in advance of rising interest rates, investors should increase their exposure to digital-friendly banks positioned to benefit from those higher rates, “while also still having fintech type growth potential from a user and revenue perspective.”
He may be on to something. Through yesterday’s market close, Silvergate Capital stock had fallen as much as 42% since November on no company-specific news.
The selling appears to be overdone, as analysts’ consensus estimates are calling for fourth-quarter revenue of $52.7 million, which would represent year-over-year growth of more than 94%. Profits are also expected to shine, with earnings per share growing 53%. If Silvergate succeeds in topping those expectations, this would mark the fifth consecutive quarter the company has done so.
Silvergate stock was on a tear last year, nearly doubling over the course of 2021, as interest in cryptocurrencies exploded, led by excitement regarding their prospects to become universally used and accepted.
However, there’s been a broad sell-off in the digital assets market since mid-November, with many cryptocurrencies losing one-third or more of their value. Shares of Silvergate Capital have become inexorably tied to crypto and — right or wrong — follow the ebbs and flows of the broader cryptocurrency market.
That said, as investors piled back into cryptocurrencies today, Silvergate Capital got an additional boost.
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