Bitcoin’s plunging price during May saw analysts slash Argo Blockchain’s (ARB) revenue forecasts for this year and next. Number crunchers at FinnCap chopped 13% off their 2021 estimate, with and even deeper 17% cut applied to 2022 revenue.
Production delays, renewable power secured for its Texas facility Argo’s acquisition of its Canadian datacentres, the decline in the bitcoin’s price and subdued mining, due in part to uncertainty around bitcoin mining in China, forced FinnCap to rethink near-term revenue expectations.
Argo Blockchain earns bitcoin by verifying blockchain distributed ledger transactions, a process known as cryptocurrency mining.
BITCOIN PRICE CRUMBLES
Bitcoin’s price plunged in May, largely partly because of the threat of tightening regulation in China and elsewhere, but also because of the pushback from climate activists because of the huge power consumption of mining cryptocurrencies.
‘It has been estimated that over 50% of bitcoin is mined in China, and we will carefully watch the evolution of the Chinese government’s May announcement that it will crack down on bitcoin mining,’ said FinnCap. The analyst believes this could ‘materially reduce mining difficulty and benefit our Argo forecasts.’
‘At the same time, Argo’s announcements that it has signed the Crypto Climate Accord, joined the Bitcoin Mining Council, and sourced renewable power for its transformational new facility in Texas, highlight that it is making strong progress towards differentiating by mining with very low cost, renewable power,’ said FinnCap.
NEW ESTIMATES
The broker is now estimating £60 million and £77.1 million revenues for 2021 and 2022 respectively. High forecast margins imply operating profit of £33.3 million and £38.3 million this year and next. In 2020 Argo recorded a £300,000 loss on £19 million revenues.
FinnCap has a target price of 220p on the stock.
Argo’s share price inched 2.5% higher to 166.45p, but this remains far below the 284p peaks hit in February 2021.
