As crypto is facing its own Leman Brothers’ moment, with the third largest exchange stopping withdrawals, filing for bankruptcy, and the company’s CEO, Sam Bankman-Fried, jumping ship. It has sent ripples throughout the sector, including the public crypto-related companies.
BMO Capital Markets put out a note on Galaxy Digital Holdings Ltd. (TSX: GLXY), who just released financial results, reiterating their outperform rating but slashing their 12-month price target down to $8 from $14, saying, “Contagion Strikes Again, Overshadowing Results and Outlook Going Forward.”
Galaxy Digital currently has four analysts covering the stock with an average 12-month price target of C$9.31, or an upside of over 100%. Out of the four analysts, one has a strong buy rating, two have buy ratings, and the last analyst has a hold rating on the stock. The street-high price target sits at C$11, or an upside of 120%.
To state the obvious, BMO believes the collapse of FTX is particularly negative as they expect contagion to spread throughout the sector, on top of the negative light the sector will get due to FTX’s size, reputation, and lobbying with U.S regulators. As a result, they believe that crypto prices will remain under pressure until investor confidence can be rebuilt.
BMO adds, “we believe the reputational damage to the crypto industry will take several quarters or more to clear, before trust with investors and regulators can be re-built.”
Another result of this would be to “accelerate regulatory enforcement and, ultimately, badly needed regulatory clarity for the industry.” Though they believe Galaxy Digital is well capitalized and has experience surviving in a downturn to make it out alive and emerge with a stronger business.
Management noted that it was able to lower its exposure to FTX by 50% during the last few days, meaning only $77 million has been affected and lost because of bankruptcy.
Additionally, BMO says that with FTX collapsing, they expect the company to continue to see moderate M&A activity, even though the management noted that the largest barrier to M&A has been valuation.
Below you can see BMO’s Sum-Of-Parts valuation for Galaxy Digital
Information for this briefing was found via Edgar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
