Galaxy’s broad crypto strategy covers key ‘buckets’: Flood Capital

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Is Galaxy really a strong buy? 

That was the deep dive in today’s Empire episode with Duncan from Flood Capital and Matt from Rittenhouse Research, which rated Galaxy a strong buy in a recent research note. 

Both Duncan and Matt made their bullish cases for Galaxy in Empire today, highlighting it as one of the more successful crypto firms. But before we dive in, I want to note that Empire co-host Jason Yanowitz and both Matt and Duncan all disclosed they hold GLXY. 

“ I basically break down Galaxy into three main buckets. They have their balance sheet, so the market cap today it’s trading around. You know, just under 28 bucks. So that’s around a $10 billion market cap. And they have a crypto balance sheet, which consists of, as of March 31st, $1.3 billion in Bitcoin,” Flood Capital’s Duncan noted.

Matt from Rittenhouse took more of a look at the businesses within Galaxy: “There’s a lot of strategic value in the digital assets business of Galaxy, just because they’re the only full platform that has this comprehensive set of offerings that’s tailored specifically for institutions and companies operating within the crypto ecosystem.”

If you need a comparison to a traditional firm, Duncan said it’s most like Goldman Sachs. 

“They’ve won really big contracts — being kind of like the Goldman in the room, the adult in the room — like the whole FTX estate deal, right?” Duncan noted. “They were in charge of custodying those assets. They have over $3 billion in staked assets, which I think this is gonna [pick] up a lot in the next few quarters with all these treasury plays. They’re the fourth-largest validator in Solana,” Duncan said. 

And then there’s the trading business, which is also quite large when compared to other crypto firms. 

“So derivatives, lending, trading, structured products. [From] the last quarter, so I think probably March 31st, [it had] nearly a $900 million loan book. So that’s like the second or third largest CFI lender in all of crypto,” he continued. 

Meanwhile, Rittenhouse believes that Galaxy is also a strong way to play the AI data center from the bitcoin mining pivot. 

“Galaxy is the most attractive way to play the ‘Bitcoin miner pivoting to AI data center operator’ investment thesis,” the note said. “Galaxy benefits strongly from the fact its Bitcoin mining operations were never a material part of its operating business.”

The stock, prior to market open, is trading around $27, up 181% over the past year. And there could be more room for it to run. 

“ I think it could be worth like a hundred dollars a share in the next few years. So that’s personally how I’m thinking about it. It’s definitely a long-term investment. I think as they execute on the data center business, if they continue to execute there, then like, I’m really happy to hold this for a very long time,” Duncan said. 

But if you want to boil down the stock price to just what it should be at today, then that would be roughly $55, per Duncan’s analysis. 

“ There could be other kinds of green shoots of positive surprises where something in their crypto business allows ’em to make an acquisition or do a joint venture that adds like a ton of value to the company long term,” Matt noted. 

Galaxy’s set to report earnings tomorrow, so we’ll have to see whether the bull cases stand.

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