Argo Blockchain (LSE: ARB) has been one of the hottest investments of the past 12 months. Over the period, shares in the cryptocurrency miner have jumped more than 2,500%.
And now that the company’s plotting the next stage of its expansion, I’ve been wondering if Argo Blockchain’s a good investment at current levels?
Argo has doubled down on its growth strategy in the past few months. It’s been raising large sums to fund the construction of a new mining facility in Texas while also pursuing an IPO in the US.
Earlier this week, the company revealed it had secured a new $25m loan from Galaxy Digital LP, taking its total credit facility to $45m. The firm’s Bitcoin holdings are acting as security for the asset.
Used to help fund its mining facility in Texas, once operational (management’s targeting mid-2020), it will expand Argo’s mining capacity by 200 megawatts (MW). The site also has the ability to increase output by a total of 1,000MW.
Argo Blockchain is also pursuing a listing on the Nasdaq stock exchange in the US. Earlier this week, the firm announced it had commenced the sale of 7,500,000 American Depositary Shares. This could raise as much as $100m for the enterprise.
All of the above should help bolster Argo’s balance sheet and put the firm on a solid growth footing for the years ahead. On the operational side of the business, during August, Argo mined 206 Bitcoin or Bitcoin Equivalent (BTC), generating revenues of £6.8m.
According to City analysts, based on its current monthly revenue run-rate, Argo Blockchain is on track to earn a net profit of around £39m this year.
Argo Blockchain’s investment potential
So considering all of the above, is the stock a good investment? I think it is. The company seems to be firing on all cylinders. It’s well funded, profitable and has enormous growth potential over the next few years.
That said, as a Bitcoin miner, the firm’s fortunes are closely linked to the price of the cryptocurrency. Therefore, if the price of the asset suddenly falls off a cliff, Argo’s revenues and profits could also plunge with it. It may also run into issues with its creditors as its borrowings are secured against its Bitcoin holdings.
This is probably the most considerable risk the company faces right now. And it’s certainly something I’ll be keeping an eye on as we advance. However, I’d buy Argo Blockchain as a speculative investment despite this risk and instead focus on its growth potential and recent progress.
As it continues to build its mining capacity, I reckon the group’s revenues will increase in the years ahead, and this should translate into share price growth as the market re-values the business and its prospects.
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Rupert Hargreaves 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.