Galaxy Digital Has Several Positive Catalysts in Play This Year: Canaccord

• Galaxy continues to evolve its business model focused on institutional trading, Canaccord said.

• Further roll-out of the company’s prime brokerage product, Galaxy One, is viewed positively.

• Broker maintains its buy rating on the stock and its C$17 ($12) price target.

Galaxy Digital (GLXY), the crypto financial services firm headed by Michael Novogratz, had a strong end to 2023 with solid operating results across its diversified business, broker Canaccord Genuity said in a research report on Wednesday.

Canaccord notes that while the fourth quarter was solid, commentary about the performance of the Toronto-listed business through the end of February was even better.

Positive highlights include an almost doubling of assets under management (AUM) from year-end to more than $10 billion, equity capital growing to over $2.1 billion versus about $1.5 billion at the end of the third quarter, and quarter-to-date income before tax of around $300 million, the report said.

“Also, importantly, Galaxy continues to evolve its business model focused on institutional trading,” analysts led by Joseph Vafi wrote, adding that “we were pleased to see further maturation and rollout of the company’s unique crypto-specific prime brokerage product, Galaxy One.”

“We view the continuing evolution of Galaxy One to be a real driver of not taking but creating market share as more traditional asset managers look to make some allocation to crypto,” the authors wrote.

The crypto firm’s increased relationship with the FTX estate drove a material increase in AUM in the asset-management unit since the end of the year, Canaccord said, adding that higher AUM results in increased trading revenue over time as FTX sells its digital assets at spot prices.

Exchange-traded fund (ETF) activity is also a tailwind. Canaccord said it is “quite encouraged by ETF rollouts with European partner DWS both in bitcoin (BTC) and ether (ETH) as well as the gradual ramp-up of the U.S. BTC ETF with partner Invesco.”

The broker maintained its buy rating on Galaxy shares with an unchanged C$17 ($12) (price target. Galaxy shares closed at C$13.46 on Wednesday.