“Silvergate’s preliminary 4Q22 results introduced a new overhang on the stock: negative earnings growth,” Bank of America analyst Brandon Berman wrote in a note published Friday.
The investment bank downgraded Silvergate to an underperform rating from neutral and slashed its price objective to $8 a share from $37 a share.
The new price outlook implies a downside of 36% from Thursday’s closing price of $12.57. The shares during Friday’s trade were down 10% at $11.29 in heavy volume of more than 5.4 million shares.
The stock sank by nearly 43% on Thursday after Silvergate said it was forced to sell assets at a loss to cover $8.1 billion worth of customer withdrawals late last year in the wake of FTX’s implosion. The San Diego-based bank said its fourth-quarter preliminary results showed a 68% drop in crypto-related deposits.
Bank of America noted Silvergate’s shares had already lost more than 90% from their peak ahead of the results, hurt by funding concerns stemming from weakening trends in the crypto market.
BofA cut its per-share earnings estimates for Silvergate by 90% for 2023 and 2024 to take into account the company’s previous announcement that it was suspending an initiative to launch a stablecoin. It now sees those earnings coming in at $0.67 and $0.90, respectively, primarily reflecting a 50% reduction to its revenue growth forecast.
“Finally, future regulatory and legislative actions – especially given the bank’s ties to and due diligence of FTX/Alameda Research – may not be fully recognized by the market,” Berman wrote.
