Wedbush cuts Silvergate target, sees ‘clear-the-decks moment’

Wedbush analyst David Chiaverini lowered the firm’s price target on Silvergate Capital to $15 from $25 and keeps an Outperform rating on the shares. The stock in midday trading is down 43% to $12.44. The company this morning pre-released select Q4 financial metrics that were worse than expected, marked by digital deposit balances coming in at $3.8B, below Wedbush’s $5B estimate, Chiaverini tells investors in a research note. Given the significant level of deposit outflows, Silvergate sold both available for sale and held to maturity securities, resulting in a large loss on sale, says the analyst. He views today’s update as a "clear-the-decks moment" for estimate revisions and expects Silvergate to run the bank profitably following the recalibration of its expense base. Importantly, Silvergate has minimal credit risk and the main risk that has generated losses has been interest rate risk with its securities portfolio, says Chiaverini. He expects a rotation in Silvergate’s shareholder base to value investors from growth investors as the "crypto winter grinds on."