Silvergate Capital (SI) offers investors an alternative way to gain exposure to the growth of the cryptocurrency ecosystem without the need to actually own a digital asset, Bank of America said in a report initiating coverage of the stock with a buy rating and a $200 price target, implying a near 50% potential upside.
- In its capacity as a regulated financial institution, Silvergate is better prepared to “navigate the complex, and still evolving regulatory environment applicable to the digital currency industry,” the report said.
- Bank of America forecasts Silvergate to grow its balance sheet five times faster than the average bank under its coverage over the next three years. The “first mover advantage” has resulted in tremendous client growth, with close to $790 billion transferred over the Silvergate Exchange Network, its global payment platform, the report added.
- Increased institutional adoption gives Silvergate a long runway for continued client and earnings growth, it added.
- As one of the most interest rate sensitive banks in the U.S., helped by its near-zero cost deposit structure, Silvergate is expected to outperform against a backdrop where the Federal Reserve (Fed) is expected to raise rates around six times this year, the bank’s analysts said.
- Volatility in the near term is to be expected, given that the stock is highly correlated to the price of bitcoin (BTC), but as the bank expands its products and service capabilities, the shares should trade more on fundamentals, the note added.
- Silvergate shares closed at $137.30 on Friday.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.