By Sam Boughedda
Shares of Silvergate Capital (NYSE:SI) were downgraded to Underweight from Overweight, with the price target cut to $70 per share from $115 by Wells Fargo (NYSE:WFC) on Thursday.
Wells Fargo analysts made the cut as the company's asset base and earnings per share "continue to shrink."
"We continue to believe these are early days of broader digital asset adoption, but the growth outlook for SI as a pure-play crypto banking solution is significantly limited in the current environment," wrote the analysts in a note to clients.
While the analysts believe that over the long term, institutional adoption of crypto should help the company, they said it is seeing volume reductions in its Silvergate Exchange Network (SEN), "which is its genesis for growth and profitability."
"While SI is among the most asset-sensitive banks, balance sheet uncertainty from deposit outflows due to depressed crytpocurrency[sic] values more than offset the benefits from higher rates," the analysts added. "While crypto was a leading indicator for the current recessionary environment, we do not believe it will be the leader on the way to future recovery, which will likely mean continued balance sheet pressure."