Silvergate Capital cut as Wedbush sees potential for 'materially reduced' earnings power

Silvergate Capital ( NYSE: SI ) stock slid 4% in Monday morning trading after Wedbush analyst David Chiaverini downgraded shares of the cryptocurrency-focused bank to Neutral from Outperform as its earnings power could be "materially reduced" if its tangible book value were to deteriorate more than expected. "The potential for the company to take a valuation allowance against its deferred tax assets could lower book value further than our prior expectation, which we believe could reduce the company’s earnings power further," Chiaverini wrote in a note. He noted SI is exploring taking a valuation allowance against its deferred tax assets, in a move that would dismiss the notion that the company "would be able to apply future income to fully utilize its tax loss carryforward." Silvergate ( SI ), which has seen its stock collapse over 90% in the past year, experienced a Q/Q and Y/Y rise in its GAAP EPS in Q3, though investors were disappointed as the use of its real-time payments network declined during the quarter and its cost of deposits increased. The company then provided poor preliminary Q4 metrics last week while announcing a ~40% slash in headcount and a $196M impairment charge. Chiaverini's Neutral rating falls between the Quant's Strong Sell rating and the average Wall Street analysts ' Buy rating. Last week, (Jan. 6) Silvergate Capital lost bull rating at JPMorgan .