Goldman Sachs downgraded shares of Silvergate Capital (NYSE:SI) to Neutral from Buy after the digital asset-focused bank's worse-than-expected Q3 earnings discouraged investors.Still, SI stock gained 1.9% in early trading as cryptocurrencies like bitcoin (BTC-USD) and ethereum (ETH-USD) extend their rallies. Goldman pointed out that "greater uncertainty about the trajectory of deposit growth, combined with reduced interest rate sensitivity, primarily as a function of the company's hedging program, will likely prevent shares from outperforming," according to a note. While SI shares dropped 62% in the past year, it's still trading at ~8.4x Goldman's 2023 estimates, but "we believe that shares are unlikely to command a more significant premium as long as uncertainty remains around the trajectory of digital asset deposits," the note said. Recall that Q3 deposits fell to $13.2B from $13.5B in Q2, and the annualized cost of deposits rose to 0.16% from 0.0% in both Q2 and Q3 2021. The Quant system warned investors earlier that SI is at high risk of performing badly due to negative EPS revisions and decelerating momentum. For a contrarian view, Seeking Alpha contributor Taylor Carmichael screened SI stock as a Strong Buy, calling at a high-growth disrupter.
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