Crypto bank Silvergate could jump 50% as institutional adoption and use of stablecoins offer ‘long avenue’ of growth, says Bank of America

Silvergate Capital has a “first-mover advantage” that could help boost its share price by half, Bank of America said on Monday as it set a $200 price target on the crypto bank.

“We believe Silvergate offers investors an alternative way to gain exposure to the growth of the digital asset ecosystem, instead of owning an actual digital asset, such as bitcoin and ethereum,” Bank of America said in a statement. a note initiating coverage of the parent company of Silvergate Bank. with a buy rating.

Silvergate Capital has seen “tremendous customer growth, enjoying its first-mover advantage, while turning a profit,” research analyst Brandon Berman said as he forecast the stock to rise to $200 per share. Shares of Silvergate Capital closed at $137.30 on Friday, implying a potential 45.7% increase in shares of the La Jolla, Calif.-based company.

Silvergate Bank operates the Silvergate Exchange Network, or SEN, which allows institutional and digital currency customers to send US dollars and euros between their Silvergate accounts and the accounts of other Silvergate customers. Its clients include cryptocurrency exchanges Coinbase, Binance, and Gemini as well as stablecoin issuers Circle and Paxos.

“Since 2018, Silvergate has more than doubled its customer base while USD transfers through the SEN have grown 5x in 2021,” Berman said. “Going forward, earnings growth should benefit from management’s plans to expand the bank’s products and services, including issuing its own stablecoin later this year.”

Silvergate Capital is “one of the companies best positioned to benefit from the growing use of the stablecoin for payment, commerce and remittances” following the Diem deal, Berman said. Additionally, Silvergate, as a regulated financial institution, can navigate the “complex, and ever-changing” regulatory environment surrounding the digital currency industry.

The increase in institutional adoption gives the company “a long streak” for continued customer and profit growth, BofA said. He expects Silvergate Capital’s earnings to grow at a compound annual growth rate of 70% over the next three years. That would be nearly three times that of high-growth peers, he said.

Silvergate Capital shares are highly correlated to the price of bitcoin, so short-term volatility is likely to be expected, BoFA said.

“However, as SI further expands its product and service capabilities, we expect stocks to trade more on fundamentals.”