The lower price of Bitcoin BTC/USD and increased mining costs have weighed on mining stocks including Argo Blockchain PLC - ADR ARBK. Here's why an analyst downgraded shares until more clarity is reached.
The Argo Blockchain Analyst: Canaccord Genuity analyst Joseph Vafi lowered the rating on Argo Blockchain from Buy to Hold and lowered the price target from $10 to $1.
The Analyst Takeaways: Pressure on cryptocurrencies such as Bitcoin could impact crypto mining-related companies such as Argo Blockchain.
The analyst called the current market a “perfect storm of low spot prices, high natural gas prices, surging hash rate, and rising interest costs.”
Related Link: Argo Blockchain Warns Of Urgent Need For Financing To Avoid Collapse — Shares Tumble Over 50%
“While Argo does not have that much floating rate debt, rising rates don’t help,” Vafi added.
The analyst saw Argo being cash flow negative going forward without additional financing. A previously announced letter of intent for $27 million in financing signed in October is no longer believed to go forward by the company.
“While the company has focused on boosting its liquidity via the sale of miners, unless macro factors improve we see Argo as potentially a cash flow negative entity.”
The analyst would like to see the company lock in more “guaranteed profitability” on its hash rate and better hosting opportunities with other miners.
“Besides growing network hash rate, rising power prices and lower BTC spot has significantly impacted gross profit margins for mining companies like Argo.”
ARBK Price Action: Argo shares are down 14.87% to $0.94 on Tuesday versus a 52-week range of $0.91 to $21.
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