Silvergate Capital Suffers KBW Downgrade Citing Limited Visibility on Crypto Bank
Silvergate Capital suffered a downgrade after an analyst from the investment bank Keefe, Bruyette & Woods (KBW), Michael Perito, slashed the pricing of its shares by 36% to $16.
News of Silvergate Capital’s rating downgrade marked a major blow from one of the remaining bullish analysts for its stock.
Silvergate Capital Downgraded to Market Perform
Perito lowered Silvergate’s stock from outperform rating to a market perform rating. The analyst cited declining visibility on the crypto-oriented bank’s outlook.
The downgrade was conveyed to the clients via a research note indicating KBW lowered the target pricing by $9 from $25.
Perito observed that Silvergate Capital confronted declining opportunities for earnings. He added that the crypto bank lost fundamental visibility in the last two months. The occurrences warranted the downgrade to a reflective rating.
Silvergate Profiling Varying Outcomes
Perito considers the inherent risk and reward profile portrayed by Silvergate Capital would have a range of varying outcomes in the subsequent months. The analyst observed that downgrading the crypto bank hardly implies giving up on Silvergate’s stock.
Perito noted that while Silvergate Capital shares are declining, previous analysis defended its management and unique operating platform. The analyst observed that a bullish rating arose from the crypto bank’s strong balance sheet and capability to withstand its questionable role within the FTX crisis.
Silvergate’s Stock Declining Visibility
Perito drew reference to the previous rating as validated by the prevailing events. The analyst lamented the volatility witnessed across the crypto industry following FTX’s bankruptcy invalidated the reliance on fundamental valuation mechanisms. Notably, the models have portrayed declining visibility in the stock performance until 2024.
Prolonged Crypto Winter and FTX Collapse Downs Silvergate’s Stock
The Silvergate Capital downgrade is an outcome of the strangling caused by the prolonged crypto winter. Besides, the FTX collapse dragged Silvergate Capital down the drain. Perito illustrated that Silvergate stock declined 90%, coinciding with a 46% fall observed in bitcoin.
Scrutiny of previous data illustrates Perito conveyed the previous rating as January 2022. The rating upgraded the Silvergate shares to above the $100 mark and anticipation to outperform to $225.
News of the downgrade has affected Silvergate Capital’s stock with two buys, five holds, and one selling. Perito indicated that the price level would average $15.
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