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Why Shares of Silvergate Capital Are Rising Today

The Motley Fool
The Motley Fool
 2022-01-19

What happened

Shares of the crypto bank Silvergate Capital (NYSE: SI) traded roughly 8.5% higher as of 1:48 p.m. ET today, as shares rebounded after plunging yesterday due to the company reporting disappointing fourth-quarter earnings results.

So what

Yesterday, Silvergate Capital reported fourth-quarter earnings per share of $0.66 on total revenue of roughly $49.3 million, both of which missed analyst estimates. It was the first time the bank had missed estimates since going public. Additionally, the bank reported a significant rise in expenses from the previous quarter, due to higher salaries.

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Image source: Getty Images.

The bank's previously announced partnership to be the exclusive issuer of Meta Platforms ' U.S. dollar-pegged stablecoin Diem also seems to be up in the air now. Management said it does hope to launch some kind of U.S. dollar-backed stablecoin this year, but did not really comment on the status of Diem.

As a result, several analysts cut their price targets. Analysts at JPMorgan Chase cut their price target from $300 to $200. Analysts at Wedbush cut their price target to $165. With Silvergate trading around $112, new price targets still imply substantial upside.

Now what

The miss on earnings is disappointing, but Silvergate's core business, a real-time payments network that allows parties to clear and settle payments instantly, which helps to better facilitate crypto trading, is still performing very well.

The bank will also see its profits rise significantly as the Federal Reserve raises its overnight lending rate later this year. While the bank's stablecoin initiatives are less certain, I do see the recent dip as a buying opportunity.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Bram Berkowitz owns Silvergate Capital Corporation. The Motley Fool owns and recommends Meta Platforms, Inc. The Motley Fool recommends Silvergate Capital Corporation. The Motley Fool has a disclosure policy .

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