Why Silvergate Capital Stock Jumped This Week

What happened

Shares of Silvergate Capital ( IF -1.75% ) soared this week, adding up to 18%, according to for Data provided by S&P Global Market Intelligence. As of 2:20 p.m. ET on Friday, the stock was still up 13.2%.

The catalyst that pushed the crypto-friendly bank higher was earnings that far beat expectations and several price target increases thanks to Wall Street analysts.

So what

Silvergate Capital reported net income of $27.4 million in the first quarter, up 115% year-over-year. This translated into earnings per share (EPS) of $0.79, which climbed 44%. To put those numbers into context, consensus analyst estimates called for net income of $16.1 million and EPS of $0.45.

Image source: Getty Images.

There were other reasons for optimism. Cryptocurrency customers grew to 1,503, up roughly 36% year-over-year, while average digital currency customer deposits reached $14.7 billion, up almost 11%.

The widespread decline in cryptocurrency year-to-date has weighed on transaction value, with the Silvergate Exchange Network (SEN) processing $142.3 billion in transfers, down 15% year-on-year on the other.

Now what

Following its stunning financial performance, Silvergate Capital has received some love from Wall Street.

Craig-Hallum analyst George Sutton raised his price target on Silvergate Capital to $160 from $150, while maintaining a buy rating on the stock. This represents an upside potential for investors of 23% over the coming year from Thursday’s closing price. Sutton cited Silvergate’s “enviable and potentially dominant role” in the cryptocurrency trading market, particularly following its acquisition of stablecoin processing system Diem.

canaccord Analyst Joseph Vafi was even more bullish, raising the company’s price target to $200 from $164 and maintaining a buy rating on the stock. This suggests more than 53% upside potential — even after Bullish price gains this week. The analyst cited growing appreciation for Silvergate’s strategy of expanding its position in the broader cryptocurrency ecosystem.

Given the broader decline in cryptocurrency exchanges during the first quarter, Silvergate Capital’s performance was all the more impressive, causing investors to push their stocks higher in the process.

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