Argo Blockchain PLC (LSE:ARB, OTCQX:ARBKF, NASDAQ:ARBK, ETR:0XP) may be set to double in value according to stockbroker finnCap which has upgraded the London-listed Bitcoin miner after today’s positive third-quarter update.
On Tuesday, Argo reported record revenue in the third quarter, bringing in some US$26mln, along with US$17.3mln of net income and US$28.2mln of earnings (EBITDA) as cryptocurrency prices enjoyed a strong rally through the three-month period.
Argo’s mining operations created 597 bitcoins and equivalents for the company in the three months ended 30 September and it ended the period holding some 1,836 bitcoins (at today’s price they would be worth around US$113.16mln).
finnCap upgraded its target price to 270p, from 240p, compared to the current market price of around 128p. A scenario-based valuation of Argo is based on the expectation that the company will be holding some 2,600 Bitcoins by the end of 2022 and a successful installation of a new mining facility.
To achieve that assumes a timely receipt and ramp-up of mining operations at the new facility in Texas.
In late September struck a deal to acquire 20,000 new crypto mining machines for the facility, with deliveries due in Q2 2022. Once up and running, the batch of new machines will significantly lift Argo’s mining capability – by computation, it will see the firm’s hashrate rise to 3.7 exahash from 1.075 at the end of September.
“We look forward to Argo highlighting further milestones for the build of its Texas facility, further detail on the operational and financial impacts of the differentiated technology that it is using within the new facility, and for Argo to continue to deliver strong operational and financial performance at its monthly updates and quarterly results,” finnCap analyst Michael Hill said.
finnCap noted that its valuation for Argo is driven by three main drivers which are the Bitcoin price, the Bitcoin network’s mining difficulty, and the costs associated with the new mining operations.
“We model five scenarios for each of these variables, and to highlight that Argo benefits from a positive skew of share price outcomes, we assign equal probabilities to Bitcoin’s price moving to US$500k or US$1k, and US$150k or $10k,” the analyst added.
“Our resulting expected value of cGBP1.3bndrives our target price of 270p.”