SIVB - SVB Financial cut to Equalweight at Morgan Stanley on delay in VC rebound

Morgan Stanley analyst Manan Gosalia downgraded SVB Financial Group ( NASDAQ: SIVB ) to Equalweight from Overweight due to limited visibility into when a venture capital rebound will materialize.

"As rate hikes come in even faster than we previously anticipated, driving up macro uncertainty and recession risks, we expect capital markets activity and venture capital deployment will get pushed out further in 2023," Gosalia wrote in a note to clients.

SVB Financial ( SIVB ), the holding company for Silicon Valley Bank, serves a significant portion of its customer base in tech and life sciences in the VC economy. That generates deposits at the bank when VC firms deploy capital and portfolio companies exit through IPOs and M&A, he said.

"Slower VC deployment activity and higher cash burn at portfolio companies puts more pressure on deposit balances at SIVB," the analyst wrote.

While the company has a large reserve of off-balance sheet client funds, their higher costs drives net interest margin lower, he added.

Gosalia cut his price target on SVB Financial ( SIVB ) to $351 from $493.

At Aug. 31, the SA Quant rating system put a Sell rating on SIVB , with poor grades in Revisions, Growth, Momentum, and Valuation.

Gosalia's Equalweight rating also contrasts with the average Wall Street rating of Buy.

In July, SA contributor BOOX Research issued a bullish call on the stock, as it's well-positioned for a rebound .

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