Wall Street analysts are souring en masse on Silvergate Capital Corp. as the bank’s decision to shut its cryptocurrency-focused payments network adds to mounting concerns about the state of its operations.
(Bloomberg) — Wall Street analysts are souring en masse on Silvergate Capital Corp. as the bank’s decision to shut its cryptocurrency-focused payments network adds to mounting concerns about the state of its operations.
In the span of less than a week, three analysts have downgraded the stock to a sell-equivalent rating, with Compass Point Research & Trading and Wedbush Securities becoming the latest to do so on Monday. Of the 11 analysts covering the bank, five have sell ratings, three have holds, while the remaining three have removed their ratings entirely. At its peak last year, the stock boasted 11 buy ratings.
The trigger for the latest downgrades came Friday, when the company discontinued the payments system, dubbed the Silvergate Exchange Network or SEN. For Wedbush’s David Chiaverini, that step could signal Silvergate may be winding down its operations.
“SEN is Silvergate’s main flagship product that previously was the key attraction for depositors,” Chiaverini wrote in a note to clients.
Meanwhile, Compass Point’s David Rochester wrote that SEN is “the entire reason why substantially all of the bank’s deposit customers keep their balances at the bank.” He expects clients of the network are in the process of withdrawing funds, or have already shifted them to another institution.
Silvergate said in a filing last week that it may have to evaluate its viability after a $1 billion loss at the end of the fourth quarter and additional losses the past two months.
Its stock has slumped about 65% in 2023, to around $6, bringing the rout since its November 2021 record high to more than 97%. The rapid selloff seemingly caught analysts off guard. Just a year ago the 12-month average analyst price target for Silvergate was about $187, more than 3,000% above where it trades at today.
The recent turmoil has gotten so bad that only five analysts even give a price target for the stock now. Rochester removed his $10 target on Monday, joining analysts including Morgan Stanley’s Manan Gosalia and JPMorgan’s Steven Alexopoulos who both dropped their targets on Silvergate last week citing uncertainty in its long-term outlook.
–With assistance from Felice Maranz.
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