In this clip from “The 5” on Motley Fool Live, recorded on Jan. 18, Motley Fool contributor Taylor Carmichael explains why investors have reason to remain optimistic about Silvergate Capital (NYSE: SI) amid volatility given the growth opportunities it has ahead.
Trevor Jennewine: A Fool fan, Taylor, had a question for you about Silvergate Capital, mentioned that it’s down 25% after earnings, and then can you please walk through it? Are there any red flags that you see in the earnings report? Taylor, have you had a chance to look through that yet?
Taylor Carmichael: I did. I glanced at the transcript. I haven’t really done a deep dive into their earnings. I don’t believe that Silvergate gives guidance, but they apparently missed the analysts’ expectations for both revenues and earnings. That would explain why it got hit today. The company remains very bullish and management is very bullish. The crypto markets were red-hot in October and November, and they cooled off substantially in December. We see that carry over into January. Crypto is very volatile. This is a stock that was trading at $15 a share a year ago or maybe it was, I don’t know, 16 months ago and now I think it’s about $100. Let me check and see where they are, $120, I want to say. But they got hammered today. It was just a bloody day. My whole portfolio got killed today, so it’s $103 now. They lost about 25% of their market cap today, which is an ugly day. Management is very bullish. I’ll remain very bullish about this company. I think it’s undervalued given their growth opportunities. For people who don’t know what Silvergate does, they operate the Silvergate Exchange Network, which is this network through which all the dollars are traded in exchange when you make a trade on Coinbase (NASDAQ: COIN), when you make a trade on Gemini, or one of the trading exchanges, the dollars shift around in Silvergate accounts. I think we’re going to see more and more of that as institutions move into Bitcoin (CRYPTO: BTC) and start buying more and more crypto. I think the numbers for Silvergate are just going to be nicer and nicer. This is a company that they’re not paying any interest on any of the money that they are holding in their trading accounts. Rising interest rates is going to be incredible for them. It’s a great way to play crypto. I’ve gotten such confidence from my Silvergate investment that I’ve started buying crypto. It’s a great way to start your process of learning. This is an essential crypto company. It’s like Coinbase in that sense, except it’s a lot smaller than Coinbase, it’s a lot cheaper than Coinbase. Coinbase is a huge, almost a mega-cap. It’s $60 billion, $70 billion. This is about a $3 billion, $4 billion company. It’s a very tiny but critical cog in the crypto industry. I remain very bullish on Silvergate.
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