Morgan Stanley has once again lowered its 2023 EPS estimate for Silvergate Capital (NYSE:SI), arguing that the digital asset-focused bank faces a "wide range of outcomes and risks" from the demise of crypto exchange FTX.
Manan Gosalia, an equity analyst at Morgan Stanley, estimated that Silvergate's (SI) digital deposit balances for quarter-end will drop further to $5B from the previous estimate of $9B, adding that its sources of liquidity to fund deposit outflows are "more expensive than SI's zero-cost digital deposits, and will weigh on earnings."
In turn, the sell-side analyst reduced his 2023 EPS estimate further to $1.58 from $4.48, compared with the Street consensus of $4.08.
Furthermore, the medium-term performance of SI stock will depend on the extremity of deposit outflows, Gosalia wrote in a note. As such, "any indication that deposit balances have troughed and are rising again would be positive for the stock."
But "evidence of additional stress on deposits, or further declines in the price of bitcoin (BTC-USD), would be negative."
SI shares rose 3.5% to $29.12 in Friday morning trading, down 50% in the past month and -85% year-over-year.
Previously, (Nov. 16) Silvergate Capital upgraded to Equal Weight at Wells Fargo as downside plays out.