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.
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.
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.
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