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Here's Why Silvergate Capital (SI) Stock Soared 91.3% QTD

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A leading provider of capital and banking services to cryptocurrency exchanges, Silvergate Capital Corporation , is in investors’ spotlight right now. Shares of the company have skyrocketed 91.3% in the quarter-to-date period, outperforming the industry’s rally of 12.4%

SI began serving digital currency providers in 2013 and has been gradually improving its market share by leveraging its technology platform and expertise to develop solutions for several large U.S. digital currency exchanges and investors globally. As of Jun 30, 2022, the company had more than 1,550 digital currency customers with $13.3 billion in deposits.

Zacks Investment Research
Image Source: Zacks Investment Research

Despite the recent drastic jump, shares of the company are still down 31% in the year-to-date period. Let’s try to decipher the main reasons for the sudden investor interest and the resultant surge in the stock price.

It is worth noting that after a dismal start to 2022, Bitcoin prices have jumped more than 20% so far this quarter. Likewise, Ethereum USD has recorded a surge of more than 65% in the same time frame. The rebound in BTC and ETH prices hugely benefited the stock price of Silvergate Capital as the company is a significant player in the space that offers banking services to these and many others in the cryptocurrency industry.

Also, investing in cryptocurrencies like Bitcoin and Ethereum is not the right move for every investor. As it is required to follow several reporting and capital regulations for public companies and banks, SI is thus, an attractive choice for risk-averse investors who want exposure to digital currencies.

Further, this Zacks Rank #2 (Buy) company reported solid second-quarter results last month. Silvergate Capital’s earnings of $1.13 per share jumped 41.3% and also conformably surpassed the Zacks Consensus Estimate of 83 cents. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

During the quarter, SI witnessed robust loan and deposit growth. The company’s several major performance metrics, including capital and profitability ratios, credit quality, net interest margin and efficiency ratio improved as well. One must note that this period was marked by subdued cryptocurrency industry performance.

With SI focusing more on digital currency markets, there has been a substantial rise in non-interest-bearing deposits. This will act as a tailwind amid the rising interest rate environment. As of Jun 30, 2022, non-interest-bearing deposits constituted more than 95% of its average total deposits. This shows the resilience of Silvergate Capital despite the discouraging operating backdrop.

Driven by these developments, analysts also seem to be optimistic about the stock. The Zacks Consensus Estimate for 2022 and 2023 earnings has been revised 14.2% and 3.1% upward, respectively, over the past 30 days.

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