Should investors be bullish on Silvergate Capital Stock?

In this clip from “The 5” on Motley Fool live, recorded on January 18, Motley Fool contributor Taylor Carmichael explains why investors have reason to remain optimistic about Silvergate Capital (NYSE:IF) in a context of volatility given the growth opportunities available to it.

Trevor Jennewin: Fool fan Taylor asked you about Silvergate Capital, mentioned it was down 25% after earnings, and then can you go through it please? Are there any red flags you see in the revenue report? Taylor, have you ever had a chance to look at it?

Taylor Carmichael: I did. I took a look at the transcript. I haven’t really delved into their earnings. I don’t believe Silvergate is giving guidance, but they apparently missed analysts’ revenue and earnings expectations. That would explain why he got hit today. The company remains very optimistic and the management is very optimistic. Crypto markets were hot in October and November, and they cooled down considerably in December. We see this continuing into January. Crypto is very volatile. This is a stock that was trading at $15 a share a year ago or maybe, I don’t know, 16 months ago and now I think it’s around $100. Let me check and see where they are, $120, I mean. But they got hammered today. It was just a fucking day. My whole wallet was killed today, so it’s $103 now. They lost about 25% of their market capitalization today, which is a bad day. Management is very optimistic. I will remain very optimistic about this company. I think it’s undervalued given their growth opportunities. For people who don’t know what Silvergate does, they operate the Silvergate Exchange Network which is this network through which all dollars are exchanged in exchange when you transact on Coinbase (NASDAQ:CURRENCY), when you trade on Gemini or any of the trading exchanges, dollars move through Silvergate accounts. I think we’re going to see more and more of that as institutions come into Bitcoin (CRYPTO: BTC) and start buying more and more crypto. I think the numbers for Silvergate are going to get better and better. This is a company that does not pay any interest on the money it holds in its trading accounts. Rising interest rates are going to be incredible for them. It’s a great way to play crypto. I gained such confidence from my Silvergate investment that I started buying crypto. It’s a great way to start your learning process. This is an essential crypto business. It’s like Coinbase in that sense, except it’s a lot smaller than Coinbase, it’s a lot cheaper than Coinbase. Coinbase is a huge, almost a mega-cap. It’s $60 billion, $70 billion. It’s a business of about $3 billion to $4 billion. It is a very small but essential cog in the crypto industry. I remain very optimistic on Silvergate.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Sallie R. Loera