Galaxy Digital (TSX: GLXY) is a technology-driven financial services and investment management firm that provides institutions and direct clients with a full suite of financial solutions spanning the digital assets ecosystem. Moreover, it operates in the following businesses: Trading, Asset Management, Principal Investments, Investment Banking, and Mining. 

Key highlights 

• Growing Global crypto users: The increasing utility of digital assets for financial services use cases is driving retail, institutional, and corporate adoption, as well as improving market liquidity and expanding usage as a means of exchanging value across traditional corporations. Global crypto users are increasing at a faster rate, rising from 106 million in January 2021 to 221 million as of November 15, 2021.

• Rising assets under management: The company’s affiliate, Galaxy Digital Asset Management, ("GDAM"), reported preliminary assets under management of USD 2,410.1 million as on February 28, 2022, compared to USD 2,324.3 million on January 31, 2022. Also, on YoY basis the numbers posted robust jump of 129%, hence the above numbers depicts that the group is increasing its AUM on the monthly basis as well as on yearly basis, which is a key positive.

• Clocking robust organic growth: The company's organic growth indicates its sustained ability to capitalize on opportunities, with net comprehensive income increasing to USD 517 million

• Driving growth through ongoing product launches: Through a cooperation with Invesco, the Company launched two passively managed ETFs focused on digital assets and blockchain (Tickers: SATO and BLKC), as well as the GVH Market Neutral Fund of Funds, the third fund in the Galaxy Vision Hill ("GVH") product suite. We believe through all this the company is deriving growth, which is a key positive.
  

Risk Associated with Investment:

The company’s business model is significantly exposed to the volatility in the cryptocurrency prices, equity market and other speculative asset classes. A downturn in the global financial market could have a significant impact on the group’s performance.

Financial overview of Q3 2021 (Expressed in thousands of US Dollars)

Source: Company Filings

• On the back of higher Advisory and management fees along Net realized gain on digital assets and investments in Q3 2021, the company reported robust strong Income of USD 216.5 million compared to USD 28.7 million in the previous corresponding period.

• In the reported period the company’s expenses skyrocketed to USD 151.2 million against USD 17.0 million in pcp.

• Primarily on the back of robust income the company clocked net income of USD 598.1 million against USD 44.5 million in pcp.

Valuation Methodology (Illustrative): Price to Book Value

Analysis by Kalkine group 

Stock recommendation

Growing adoption of cryptocurrencies, including additional institutional investment and the rollout of Bitcoin-as-legal-tender in El Salvador, as well as increased regulatory clarity contributed to the Q3 gains. In the third quarter of 2021, the company also continued to witness institutional inflows into Bitcoin. Decentralized finance applications built on Ethereum grew in both active users and value transacted. Additionally, the global crypto users are growing at a higher pace, up from 106 million in Jan 21 to 221 million as of November 15, 2021.

Moreover, the group continues to drive growth through ongoing product launches across the platform, including the launch of two passively managed ETFs focused on digital assets and blockchain, which is a key positive. Furthermore, GLXY look forward to its U.S. listing and the close the BitGo acquisition, which they now expect will occur in the first quarter 2022. Therefore, considering the above rationales, optimistic aspects, and valuation, we recommend a “Speculative Buy” rating on the stock at the current market price of CAD 15.18 at 10:02 AM Toronto time on March 7, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on March 7, 2022). Source: Kalkine, Analysis by Kalkine Group 

Technical Analysis Summary

Disclaimer

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