Mizuho cuts BitGo price target to $11, but says Clarity Act delays could prove advantageous

Delays to U.S. crypto market-structure legislation could benefit crypto custodian BitGo Holding by extending its regulatory head start over competitors. That's according to Mizuho analysts, who, despite cutting their price target for the company's shares, maintained their Outperform rating.

Mizuho analysts cut their stock price target for BitGo (BTGO) to $11 from $14. BTGO was changing hands at $5.61 as of 2:47 p.m. EST, according to The Block's price data.

"Consensus reads US market-structure delay as an overhang. We believe it might quietly help BitGo," Mizuho analysts wrote in a research note to clients.  The company already runs the first federally chartered digital asset trust bank owned by a publicly traded company, so its regulatory standing doesn't hinge on new legislation passing.

The Clarity Act is intended to establish a federal market-structure framework for digital assets and clarify how authority is divided between regulators. The legislation has faced repeated delays amid negotiations over several key issues.

The delay could give BitGo an advantage while competitors wait for the legislation to establish the rules governing the U.S. market, according to Mizuho.

"Every quarter the framework stays unsettled, the charter and compliance headstart compounds and the bar for new entrants rises. Regulation arriving later rather than sooner actually extends the window where 'trusted and already licensed' is the whole game," they added.

BitGo Q2 earnings

This week, BitGo reported $4.33 billion in total revenue in the second quarter of this year, up 79.6% year-over-year. Though it experienced strong revenue growth, it posted a net loss of $19 million for the second quarter, which, when compared to the previous quarter, was an improvement from the $60.7 million loss registered during the previous fiscal period.

While Mizuho sees the market pricing BitGo like a struggling company, they view the company as a "high-growth/recurring revenue business." The analysts cited BitGo increasing its customer base by 27% year over year and subscription and services revenue growing 7% when compared to the previous quarter. Additionally, its work with DTCC, Canton and Figure suggests BitGo could become important infrastructure for tokenized securities and other onchain financial products, they also said.

Mizuho managed or co-managed a BitGo public offering and received compensation for investment-banking services from the company during the past 12 months, according to disclosures included in the report.