Buying shares of Signature Bank is a cheap way to gain exposure to cryptocurrencies, such as bitcoin, according to BofA Securities analyst Ebrahim Poonawala, prompting him to raise his price target by 15%.
“We believe that at the stock’s current valuation investors are getting crypto-related optionality for free,” Poonawala wrote in a note to clients.
He reiterated his buy rating on Signature Bank, while boosting his price target to $275 from $240, which implies a 26.1% gain from current levels.
The new target ties Poonawala with Maxim Group’s Michael Diana as the second-most bullish on the New York-based regional bank among the 21 analysts surveyed by FactSet, just slightly behind Wedbush’s David Chiaverini who has a $280 price target.
The stock SBNY, -1.67% fell 1.3% in afternoon trading, to pull back from Friday’s record close, as bitcoin BTCUSD, -8.98% dropped 7.1% to about $53,387. Over the past three months, Signature Bank shares have more than doubled (up 105.6%) and bitcoin has nearly tripled (up 185.9%), while the SPDR S&P Regional Bank exchange-traded fund KRE, +2.05% has rallied 37.2% and the S&P 500 index SPX, -0.77% has gained 9.6%.
Poonawala said the bank’s digital asset banking “crypto” strategy has received heightened investor interest in recent days, likely driven by bitcoin’s increasing institutional acceptance and increasing price. Signet, the bank’s new digital payments platform, has generated “remarkable” deposit growth, with balances more than quadrupling last year to more than $10 billion, or about 16% of total deposits, “and the potential for balances to double in 2021,” Poonawala said.
Bitcoin’s market value topped $1 trillion for the first time after shooting up 17.4% last week to close Friday at a record $55,801.86, and after soaring 25.1% the week before. Helping fuel the gains, Tesla Inc. TSLA, -8.55% and Mastercard Inc. MA, +2.25% said they would begin accepting cryptocurrencies as payment, and The Wall Street Journal reported that Bank of New York Mellon Corp. BK, +3.33% would hold, transfer and issue cryptocurrencies on behalf of its asset management clients.
Meanwhile, Poonawala said Signature Bank’s stock is being valued at “a significant discount” to peers, and “far below” that of Silvergate Capital Corp. SI, -4.96%, which he said was Signature’s closest rival when it comes to banking digital currencies. And while competition is likely to intensify, Signature’s first-mover advantage should give the bank an edge in the digital asset market, and help its stock outperform its regional bank peers.
“Notably, unlike rivals in the crypto banking space, [Signature] is not a one trick pony,” Poonawala wrote. “It is important that investors not lose sight of this fact when evaluating [Signature’s] risk/reward.”