Bernstein Initiates SharpLink Coverage With Outperform Rating for Ethereum Treasury

Analysts at investment firm Bernstein began coverage on Sharplink Gaming on Thursday with an “outperform” rating, saying Ethereum Treasury stock could nearly double as the Federal Reserve lowers borrowing costs.

Bernstein analysts announced a price target for Sharplink of $24 per share, representing an 80% upside from the current share price. According to , the company’s stock price has been hovering around $13.08 recently, after peaking at $124.12 earlier this year. Yahoo Finance.

“We expect SBET to emerge as a compliance-first, institutionally focused investment vehicle for accessing Ethereum as an investment and yield-producing asset,” the analysts wrote. “As we move towards a lower interest rate regime, we anticipate significant investor interest in SBET’s ability to provide sustainable Ethereum yields that exceed industry Ethereum staking yields.”

Like Strategy, the world’s largest corporate holder of Bitcoin, Sharplink aims to increase the amount of cryptocurrency it owns per diluted share in order to maximize shareholder value. SharpLink currently owns 859,400 Ethereum, which was recently valued at $12.65 billion.

Unlike Bitcoin, Ethereum can be staked natively, allowing anyone to earn rewards by participating in the transaction validation process. This, along with Ethereum’s robust liquidity, is one of the factors that makes it “ideal for digital asset strategies,” they write.

“Ethereum’s sustainable native staking yields (and other blockchain-based yield opportunities) enable digital asset treasury models to build sustainable operating returns from core treasury strategies beyond capital market-funded acquisitions,” they write.

Bernstein highlighted Sharplink’s leadership team, including Ethereum co-founder and chairman Joseph Rubin, who is also the founder of ConsenSys, the company behind MetaMask. (Disclaimer: Consensys 22 investors At editorially independent Decrypt. )

SharpLink’s management team is “strongly aligned with the Ethereum ecosystem,” analysts noted. Earlier this week, SharpLink signaled Ultimately, the company will deploy its $200 million worth of Ethereum holdings to the Ethereum layer 2 Linea created by ConsenSys.

The company said this can generate revenue enhancements, including rewards earned for securing EigenCloud Autonomous Verifiable Services through a process known as restaking.

Bernstein analysts said: “This will likely enable the company to increase its revenue from multiple sources.” “In the long term, we believe that SBET differentiation has the potential to make the economy more sustainable and increase the ability to leverage institutional debt and equity markets.”

“Severely undervalued”

Although SharpLink is able to sustainably increase its Ethereum holdings through staking and related activities, common tools among competitors were not always available.

Most financial companies increase the amount of virtual currency they hold per share by issuing common stock. If a company’s stock trades at a premium compared to its crypto holdings, this move allows the company to use the difference to increase its holdings.

This premium is often referred to as mNAV (multiple to net asset value). Some see this metric as an indication of investors’ confidence in a company’s vision to realize its strategy, whether it involves Bitcoin, Ethereum or other digital assets.

Bernstein’s price target indicates a 15% premium to its crypto holdings, reflecting its ability to generate yield at a compound annual growth rate of 3.4% over the next 10 years. They also write that they can earn a 2.4% yield from Ethereum and 1% from Ethereum and stock purchases.

SharpLink’s mNAV on Thursday was 0.88, according to . Strategic Ethereum Reserve. That means the company was valued at 19%. discount Compared to the amount of crypto assets held.

“We believe SBET’s premium to ETH NAV is justified by its ability to leverage and ETH staking yield,” the analysts wrote, while acknowledging that market sentiment may also play a role and lead to sharplink stock price fluctuations.

company stock price plummeted 70% after its stock registration application was deemed valid by the SEC earlier this year. At that point, investors who had funded the company’s move away from gambling marketing had the opportunity to sell their shares.

Last month, Sharplink I bought it again The company sold 1 million shares for $32 million, saying it believes its common stock is “significantly undervalued” by the market. In August, the company got approval Up to $1.5 billion worth of common stock will be repurchased.

Bernstein analysts wrote that Sharplink could eventually issue its own debt to reflect the strategy. Bitcoin buying companies have historically issued convertible bonds as a way to accumulate more assets and leverage effectively.

“We expect SBET to continue deploying share buybacks to close the discount gap,” they wrote. “we [then] As SBET’s stock price stabilizes relative to Ethereum NAV, we expect SBET to gradually expand its debt strategy. ”

Ethereum has recently been trading around $3,780, down 5.3% in the past 24 hours. It’s up 13.5% since the beginning of the year.

In Myriad Prediction Markets, only 7% of respondents believe SharpLink will hold more Ethereum than BitMine Immersion, which currently holds the largest ETH funds. Myriad is a division of Dastan, Dastan’s parent company. decryption.