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Analysts Are More Bearish On Silvergate Capital Corporation (NYSE:SI) Than They Used To Be

Today is shaping up negative for Silvergate Capital Corporation (NYSE:SI) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the ten analysts covering Silvergate Capital are now predicting revenues of US$326m in 2023. If met, this would reflect a decent 16% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to be US$3.73, roughly flat on the last 12 months. Previously, the analysts had been modelling revenues of US$439m and earnings per share (EPS) of US$5.67 in 2023. Indeed, we can see that the analysts are a lot more bearish about Silvergate Capital's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Silvergate Capital

earnings-and-revenue-growth
earnings-and-revenue-growth

It'll come as no surprise then, to learn that the analysts have cut their price target 27% to US$51.45. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Silvergate Capital, with the most bullish analyst valuing it at US$150 and the most bearish at US$24.00 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Silvergate Capital's revenue growth is expected to slow, with the forecast 12% annualised growth rate until the end of 2023 being well below the historical 33% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.1% per year. So it's pretty clear that, while Silvergate Capital's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Silvergate Capital.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Silvergate Capital analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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