The Motley Fool

Here’s why I like Argo Blockchain shares despite the crypto wobble

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Blockchain and crypto currency concept.
Image source: Getty Images

Over the past week, the Bitcoin price has fallen 8.7%. Other large coins, such as Ethereum, have fallen in double-digits. Despite this wobble in the crypto market, it’s pleasing to see that Argo Blockchain (LSE:ARB) shares have actually held up during this period at around 140p. To me, this is a great sign, and with other recent positive news about the company, I think shares could be a buy right now.

Crypto vs Argo Blockchain shares

For much of the past year, the correlation between Argo Blockchain shares and crypto prices has been high. Given that the company is a crypto mining company, some of this correlation makes sense. In a similar way to gold miners and the price of gold, higher crypto prices are good for Argo Blockchain.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Yet due to the large and erratic swings in the price of different coins, this correlation was quite off-putting for some investors (myself included). In my opinion, some of the swings were made larger due to speculative buying and selling. If people thought the Bitcoin price would rise, they would buy Argo Blockchain shares. If they thought it would fall, they would sell.

However, as time passes, it seems that the moves in the share price is now more down to the fundamental business operations. This makes it a lot more appealing for me to buy the shares.

Good company news

Several recent developments make me like the look of Argo Blockchain shares. To begin with, the company listed American Depository Receipts (ADR) on the NASDAQ in September. ADRs are essentially a way for US investors to easily buy stock in non-US-listed companies. The benefit of this move opens up a large market of US investors for the business. It’s good exposure and helps to build a larger brand.

Sticking to news from the US, there’s also good progress being seen on the new mining site in Texas. At the end of the day, if the business can expand its capacity to mine then this should contribute to higher revenue.

The Q3 results also should give confidence to those holding Argo Blockchain shares. Revenue came in at £19.3m, with net income at £12.9m. It has a very high profit margin, largely due to the revaluation of the coin values along with realised profits from the sale of digital currencies.

This is one risk that I do need to be aware of. The company has done well as the broad trend in the crypto markets has been higher in the past year. Over a one-year period, the shares are up 15 times. Yet if we see a meaningful market slump, then the revaluation of coin values will be negative. This will drag the profit margin lower.

Value to be had

Overall, I’m considering buying Argo Blockchain shares now. The risk of being correlated to movements in Bitcoin and other coins is inevitable. However, I feel this risk is reducing as investors are looking more at the fair value of the business. With good news out in recent months, I think this bodes well for gains in the share price looking forward.

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.

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.

Jon Smith and The Motley Fool UK have 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.