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The roller-coaster Argo Blockchain (LSE: ARB) shares have been on makes the ‘Big One’ at Blackpool Pleasure Beach look insignificant.
In 2021, the share price peaked at 340p. As I write on 29 August, it’s down to 8.9p. That’s a painful 97% collapse. And the Bitcoin (BTC) miner that was pushing a billion pounds is valued at just a fraction over £50m, at the time of writing.
The BTC price has fallen over the same timescale, but by nowhere near as much. It seems to be staying around $20,000 per coin. So might Argo Blockchain be the penny stock buy of 2023?
First half
Argo has just released first-half results, and the share price has been up and down a couple of percent as a result.
One thing strikes me above all else when looking at the headline updates. This is a company that was once expected to generate hugh cash flows. But now it’s more like it’s under financial pressure and looking to survive.
The half saw revenue of $24m. That’s after the firm mined 947 Bitcoin and Bitcoin equivalent, up 1%. As the update said that was “despite a 78% increase in the global hashrate from 30 June 2022 to 30 June 2023“.
Revenue was 31% lower than the first half of 2022, and led to a net loss of $18.8m.
Too cheap now?
The big question for me now is whether Argo Blockchain shares are oversold and a good buy. I had long considered the stock as seriously overpriced, but now I do wonder if this might be a good penny stock opportunity.
Argo cut its non-mining costs by 21% in the second quarter and reached the end of June with $9.1m cash on the books. There was also 46 BTC. And at the latest price, that should be worth around $1m.
Since that date in July, Argo raised $7.5m from a share placement. A few years ago, the idea that Argo might need such support would probably have frightened shareholders. Right now though, I think it might have laid the grounds for a profitable turnaround.
Earnings and debt
But here’s my problem. Current forecasts don’t show any profits for the next couple of years. There are positive EBITDA figures on the cards. But the predicted bottom line is still negative for both earnings and cash flow.
Debt is part of the problem. At 30 June, net debt stood at $75m. That’s a lot, but it’s down $68m from June 2022. And it’s actually dropped a little more since then, to $72m, as some was repaid from the share placement proceeds.
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To buy, or not?
If debt continues to fall and revenue ticks upwards as forecasts suggest, I think there’s a good chance Argo Blockchain shares might turn out to be a good buy now.
But on the other hand, it’s all dependent on the BTC price. That could be a winning bet. But I won’t be gambling on it.
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