What happened
Shares of Silvergate Capital (NYSE: SI) soared this week, adding as much as 18%, according to 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 drove the cryptocurrency-friendly bank higher were earnings that far exceeded expectations and several price target increases courtesy of Wall Street analysts.
So what
Silvergate Capital reported first-quarter net income of $27.4 million, surging 115% year over year. This resulted in earnings per share (EPS) of $0.79, which climbed 44%. To put those numbers in context, analysts' consensus estimates were calling for net income of $16.1 million and EPS $0.45.
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There were other reasons to be bullish. Cryptocurrency customers grew to 1,503, up roughly 36% year over year, while average digital currency customer deposits grew to $14.7 billion, rising nearly 11%.
The broad decline in cryptocurrency since the beginning of the year weighed on the value of transactions, as the Silvergate Exchange Network (SEN) handled $142.3 billion in transfers, down 15% year over year.
Now what
In the wake of its blowout financial performance, Silvergate Capital got a bit of love from Wall Street.
Craig-Hallum analyst George Sutton raised his price target on Silvergate Capital to $160, up from $150, while maintaining a buy rating on the stock. This represents potential upside for investors of 23% over the coming year compared to 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 firm's price target to $200, up from $164, and keeping a buy rating on the shares. This suggests potential upside of more than 53% -- even after this week's bullish price gains. The analyst cited a growing appreciation for Silvergate's strategy of expanding its position in the broader cryptocurrency ecosystem.
Given the broader pullback in cryptocurrency trading during the first quarter, Silvergate Capital's performance was all the more impressive, causing investors to bid up its shares in the process.
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Danny Vena has no position in any of the stocks mentioned. The Motley Fool recommends Silvergate Capital Corporation. The Motley Fool has a disclosure policy.
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