After the latest ARB share price slide, is it finally time to buy?

New virtual money concept, Gold Bitcoins

I don’t invest in cryptocurrency. But when I see a company producing something that’s in big demand, I often feel I want to buy the shares. That’s the way I’m thinking after the latest Argo Blockchain (LSE: ARB) share price fall.

We’ve seen some crypto disasters of late. It seems a couple of cryptocurrencies have almost completely collapsed, including a so-called stablecoin by the name of terraUSD. Those are supposed to remain, well, stable. But that ambition clearly failed here.

Fears have spread to established coins like Bitcoin, which has lost 26% in the past month. The ARB share price has closely followed suit, dropping 30% over the same timescale:

Bitcoin mirror

I did not expect the ARB share price to mirror the price of Bitcoin quite so closely. I’d expect to see its shares more highly geared. By that, I mean I’d expect them to climb significantly higher than Bitcoin gains, and fall significantly lower than Bitcoin losses.

I’d predict something similar with gold miners, for example. When the price of gold rises, the profit margins from mining and selling it should improve by a greater percentage.

In these volatile times, following the ARB share price slide from its 2021 peak, I really thought Argo Blockchain would have had a more rocky ride than it has in these past weeks. Why hasn’t it?

I wonder if the negative investing sentiment of the past couple of years is turning. Instead of dumping ARB shares as soon as there’s bad news, are we seeing growing investor support?

It all comes down to a fair valuation for the stock, and I find that very hard to work out.

BTC holdings

At 31 March, the company had a stash of 2,700 Bitcoin and Bitcoin Equivalents (BTC). That was worth £93.6m at the time. On the latest price, the value stands at only £64m. Meanwhile, the company commands a market-cap of £213m, more than three times its BTC holdings.

The valuation is obviously based on Argo’s future mining stream. And the company gave us an update on that in May. In the first quarter, revenue and net income kept growing, with 470 new BTC added to make up that 31 March total.

But it’s really all about future expansion. And, as CEO Peter Wall put it, “to be a successful miner you need three components – power, miners, and capital.”

He added that Argo is growing all three, the main key to me being finance. That, though, is double-edged, as investors will want to minimise potential dilution at the same time as expanding capacity.

Will I buy ARB?

So what’s the bottom line for me? My big problem remains that I can’t get a feel for a fair valuation for ARB shares. And that’s enough to rule me out of any investment.

But if I owned the shares, I’d be encouraged by what I see as resilience in the face of all this recent crypto weakness.

The post After the latest ARB share price slide, is it finally time to buy? appeared first on The Motley Fool UK.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

More reading

  • At 55p, is the Argo Blockchain (LON:ARB) share price too cheap to miss?
  • Should I buy Argo Blockchain shares right now?
  • Does the ARB share price make it a top tech buy in 2022?
  • The Argo Blockchain (LON:ARB) share price just jumped 15%. Time to buy?

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.