These Analysts Just Made An Downgrade To Their Silvergate Capital Corporation (NYSE:SI) EPS Forecasts

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) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After the downgrade, the consensus from Silvergate Capital's nine analysts is for revenues of US$182m in 2023, which would reflect a concerning 35% decline in sales compared to the last year of performance. After this downgrade, the company is anticipated to report a loss of US$0.024 in 2023, a sharp decline from a profit over the last year. Before this latest update, the analysts had been forecasting revenues of US$299m and earnings per share (EPS) of US$3.33 in 2023. So we can see that the consensus has become notably more bearish on Silvergate Capital's outlook with these numbers, making a sizeable cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous forecasts of a profit.

Check out our latest analysis for Silvergate Capital

The consensus price target fell 65% to US$16.64, implicitly signalling that lower earnings per share are a leading indicator for Silvergate Capital's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Silvergate Capital analyst has a price target of US$38.00 per share, while the most pessimistic values it at US$8.00. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Silvergate Capital's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 30% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 33% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.7% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Silvergate Capital is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting Silvergate Capital to become unprofitable next year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Silvergate Capital's financials, such as dilutive stock issuance over the past year. Learn more, and discover the 1 other concern we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.