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Is Argo Blockchain’s share price now too cheap to ignore?

New virtual money concept, Gold Bitcoins
Image source: Getty Images

2021 has been a choppy ride for the Argo Blockchain (LSE: ARB) share price. The cryptocurrency miner soared to record peaks just shy of 300p in February as prices of Bitcoin and other digital assets rocketed. But a combination of profit taking and fears that regulators might strangle digital currencies as an asset class, has subsequently sunk this UK tech share.

Argo Blockchain’s share price is now trading at 143p per share, a whopping discount to those recent all-time peaks. Still, it’s worth remembering that the company still trades well above the 5.2p it was just 12 months ago. Is the company now too cheap to miss?

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Reasons to be bullish

There are several reasons why Argo Blockchain could prove to be a top long-term buy for my portfolio. These include:

  • Its exposure to the fast-growing digital economy. The world is becoming increasingly dependent upon digital technology. The pace of the revolution has kicked up a number of gears, too, following the Covid-19 outbreak and the boost to e-commerce and flexible working. Supporters of cryptocurrencies feel that these assets are about to play an essential role in an increasingly digitalised society.
  • Production ramp-ups coming. Argo Blockchain is taking steps to exploit this opportunity by significantly increasing production capacity. The tech giant’s output capabilities shot to 1,075 petahash as of June, up from 685 petahash at the end of 2020. And it recently broke ground on a new mining facility in West Texas which it hopes will become operational early next year. This will give it access to up to up to 800MW of electricity with which to deliver future expansion.
  • Margin improvements planned. The margins for digital currency miners beat those for basically any other industry. Take Argo Blockchain’s, for example, which rang in at an eye-popping 81% in the first half. The company is hoping to boost its margins even further too through its West Texas facility, sited as it is to provide plenty of cheap, clean energy for its mining ambitions.
    Hardware at Argo Blockchain's mining facility at Baie Comeau, Canada

    Image source: Argo Blockchain

Why Argo Blockchain’s share price could sink

It’s clear that Argo Blockchain has plenty of long-term potential, then. But I’m afraid I won’t be buying this UK share for my own investment portfolio any time soon. This is essentially a commodities-based business whose profits are determined by the price of the underlying asset. And I’m not totally convinced that Bitcoin et al will become widely traded currencies as governments and central banks clamp down on their use and impose rules concerning their transparency.

There are significant company-specific threats that could sink Argo Blockchain’s share price too. The business doesn’t have any ‘barriers to entry,’ meaning that a competitor could spring up at any time. It could also plummet in value if the construction of its complex West Texas mining facility hits trouble. Argo Blockchain could well prove to be a great investment for the next decade. But for the time being I’m happy to sit on the sidelines and watch the action.

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Royston Wild 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.

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