Silvergate Capital is a Zacks Rank #1 (Strong Buy) that is a bank holding company for Silvergate Bank. The company provides banking products and services to business and individual clients, with a niche focus in digital assets.
The stock took off in late 2021 because of its crypto focused approach. However, as the crypto markets fell apart, so did the Silvergate stock price. But after a recent positive earnings report, the bulls are coming back into the stock.
More about Silvergate
The company was founded in 1988 and is headquartered in La Jolla, CA. It employs 279 people and has a market cap of $4.1 billion.
Silvergate’s focus in digital currency is to provide innovative financial infrastructure and services for institutions and investors. The company accepts deposit products, including interest and noninterest bearing demand accounts, money market and savings accounts, and certificates of deposit accounts.
While the Zacks Rank for SI is high, investors have the right to question the valuation. The stock has a Zacks Style Score of “F” in Value due to the a Forward PE of 40. This isn’t bad for a tech company, but high for a bank. That being said recent earnings are proving that Silvergate could grow into that valuation if the crypto industry can remain robust.
Q1 Earnings Beat
On April 19th, Silvergate reported a 71% EPS beat for Q1. This was a nice rebound from the 4% miss last quarter, the only miss since the company came to market in 2019.
While the EPS number was solid, revenues came in below expectations. However, digital customer deposits came in at $14.7B v 13.3B last quarter. This was partly because the amount of digital currency customers jumped 36% from the prior year.
CEO Alan Lane had he following comments about the quarter:
“We started off 2022 on a strong note, driven by the power of our platform and continued progress on our strategic initiatives. I’m particularly pleased with our first quarter results when you consider that this was one of the most challenging periods for the broader crypto ecosystem since the beginning of the pandemic. While volume on the Silvergate Exchange Network was impacted by broader industry trends, I remain encouraged by the continued growth we saw in customers, SEN Leverage commitments, and average deposits, which reached a record $14.7 billion.”
Estimates Rising
Because of the big earnings beat, we have seen earnings estimates shoot higher over the last 7 days. For next quarter, numbers have gone up 4.5%, from $0.87 to $0.91. For next year, estimates have surged 13% higher, from $5.96 to $6.73.
Analysts are commenting that higher interest rates and the ability to put cash to work in higher yielding assets will have a strong impact on Silvergate’s earnings power.
For that reason, analysts are lifting their price targets for the stock.
Upgrades
Since earnings, we have seen a handful of upgrades and price targets significantly above current trading levels.
In a note from Wedbush, the firm comments that Silvergate’s ability to deploy excess liquidity and lower expenses should drive EPS higher. The firm has an Outperform rating and a $200 price target, which is almost 50% above current levels.
Wedbush isn’t the only bull, as both Canaccord ($200) and B.Riley ($260) have similar targets. Goldman Sachs also reiterated SI with a Buy, but cut its target to $180 from $210. This is still over 30% from current levels.
The Technical Take
Because of its dealing in the crypto markets, SI is a very volatile name. The stock had a big run from late 2020 into late 2021. During this time, SI moved from $15 to a high of $239, before dropping to $85 earlier this year.
This drop was a little more than a 61.8% retracement from the lows to highs. After some back and forth, the stock started moving higher off that level and is now testing some moving averages.
The 50-day MA is at $130, the 200-day at $134 and the 21-day at $140. All these levels were taken out after earnings, but the stock has pulled back to the 200-day in the mid-$130s.
The bulls have established the long-term support at the 61.8% retracement. However, they will want to maintain the moving averages if they want the momentum to continue.
Look for the $143 level to be a breakout spot, that could take the stock above the march highs at $160.
In Summary
Despite the struggles in Bitcoin and Ethereum over the last quarter, Silvergate performed above expectations. The bulls are pushing the stock higher on the news, but will want to hold the moving averages in this volatile name.
Investors looking to get in should watch support around the $130 level and be willing to add above $143 for a run above those March highs.
If crypto markets improve and come out of the crypto bear market, look for the bulls to push the stock close to those analyst targets at $200.
Bull of the Day: Silvergate Capital (SI)
Silvergate Capital is a Zacks Rank #1 (Strong Buy) that is a bank holding company for Silvergate Bank. The company provides banking products and services to business and individual clients, with a niche focus in digital assets.
The stock took off in late 2021 because of its crypto focused approach. However, as the crypto markets fell apart, so did the Silvergate stock price. But after a recent positive earnings report, the bulls are coming back into the stock.
More about Silvergate
The company was founded in 1988 and is headquartered in La Jolla, CA. It employs 279 people and has a market cap of $4.1 billion.
Silvergate’s focus in digital currency is to provide innovative financial infrastructure and services for institutions and investors. The company accepts deposit products, including interest and noninterest bearing demand accounts, money market and savings accounts, and certificates of deposit accounts.
While the Zacks Rank for SI is high, investors have the right to question the valuation. The stock has a Zacks Style Score of “F” in Value due to the a Forward PE of 40. This isn’t bad for a tech company, but high for a bank. That being said recent earnings are proving that Silvergate could grow into that valuation if the crypto industry can remain robust.
Q1 Earnings Beat
On April 19th, Silvergate reported a 71% EPS beat for Q1. This was a nice rebound from the 4% miss last quarter, the only miss since the company came to market in 2019.
Silvergate Capital Corporation Price and EPS Surprise
Silvergate Capital Corporation price-eps-surprise | Silvergate Capital Corporation Quote
While the EPS number was solid, revenues came in below expectations. However, digital customer deposits came in at $14.7B v 13.3B last quarter. This was partly because the amount of digital currency customers jumped 36% from the prior year.
CEO Alan Lane had he following comments about the quarter:
“We started off 2022 on a strong note, driven by the power of our platform and continued progress on our strategic initiatives. I’m particularly pleased with our first quarter results when you consider that this was one of the most challenging periods for the broader crypto ecosystem since the beginning of the pandemic. While volume on the Silvergate Exchange Network was impacted by broader industry trends, I remain encouraged by the continued growth we saw in customers, SEN Leverage commitments, and average deposits, which reached a record $14.7 billion.”
Estimates Rising
Because of the big earnings beat, we have seen earnings estimates shoot higher over the last 7 days. For next quarter, numbers have gone up 4.5%, from $0.87 to $0.91. For next year, estimates have surged 13% higher, from $5.96 to $6.73.
Analysts are commenting that higher interest rates and the ability to put cash to work in higher yielding assets will have a strong impact on Silvergate’s earnings power.
For that reason, analysts are lifting their price targets for the stock.
Upgrades
Since earnings, we have seen a handful of upgrades and price targets significantly above current trading levels.
In a note from Wedbush, the firm comments that Silvergate’s ability to deploy excess liquidity and lower expenses should drive EPS higher. The firm has an Outperform rating and a $200 price target, which is almost 50% above current levels.
Wedbush isn’t the only bull, as both Canaccord ($200) and B.Riley ($260) have similar targets. Goldman Sachs also reiterated SI with a Buy, but cut its target to $180 from $210. This is still over 30% from current levels.
The Technical Take
Because of its dealing in the crypto markets, SI is a very volatile name. The stock had a big run from late 2020 into late 2021. During this time, SI moved from $15 to a high of $239, before dropping to $85 earlier this year.
This drop was a little more than a 61.8% retracement from the lows to highs. After some back and forth, the stock started moving higher off that level and is now testing some moving averages.
The 50-day MA is at $130, the 200-day at $134 and the 21-day at $140. All these levels were taken out after earnings, but the stock has pulled back to the 200-day in the mid-$130s.
The bulls have established the long-term support at the 61.8% retracement. However, they will want to maintain the moving averages if they want the momentum to continue.
Look for the $143 level to be a breakout spot, that could take the stock above the march highs at $160.
In Summary
Despite the struggles in Bitcoin and Ethereum over the last quarter, Silvergate performed above expectations. The bulls are pushing the stock higher on the news, but will want to hold the moving averages in this volatile name.
Investors looking to get in should watch support around the $130 level and be willing to add above $143 for a run above those March highs.
If crypto markets improve and come out of the crypto bear market, look for the bulls to push the stock close to those analyst targets at $200.