Cryptocurrency adoption has continued to increase at a healthy pace. Within the regulated arena, cryptocurrency stocks provide a good investment option.
HIVE Blockchain Technologies (HVBT) is a small-cap crypto miner, that looks attractive at current levels of $3.45.
Given recent business developments, HVBT stock might trend higher from current levels. I am bullish on the stock. (See HVBT stock charts on TipRanks)
Bitcoin Volatile, but Crypto Adoption Increasing
Bitcoin seems similar to a very high-beta stock in terms of volatility. The cryptocurrency surged to highs of $64,800 in April 2021.
However, with China banning crypto mining, a sharp correction followed. The correction was accelerated in May, with Elon Musk voicing concerns related to energy consumption from bitcoin mining.
Bitcoin has trended upwards lately, however. At current levels of $50,441, the cryptocurrency — with limited supply — seems attractive.
It’s worth noting that global crypto users surpassed 100 million in January. That number surged to 211 million in June.
HIVE Blockchain on a High-Growth Trajectory
HIVE reported $13.7 million in income from currency mining in Q3 of its Fiscal Year 2021.
It’s likely that the company’s revenue from mining will surge in the next 12-24 months. In July 2021, the company announced the purchase of 4,000 next generation miners. Even prior to this, the company has been on a miner acquisition spree.
With the latest purchase of 4,000 miners, the company expects to achieve a revenue run-rate of $200 million.
The company expects annual operating and overhead costs of $25 million. Therefore, EBITDA margin and cash flows are likely to be robust once all miners are deployed. This is likely to translate into stock upside.
Diversification for Further Growth
A key strategy followed by HIVE is to sell mined cryptocurrency for working capital and expansion. Once all miners are deployed and cash flow swells, the company is likely to pursue diversification.
This view is underscored by the fact that HIVE completed its share investment in DeFi Technologies in April. With the share-swap transaction, HIVE holds 5% stake in the decentralized finance company.
It’s worth noting that decentralized finance is already worth $80 billion. As this business segment continues to grow at a stellar pace, there will be ample opportunities in the coming years.
Wall Street’s Take
According to TipRanks’ analyst consensus rating, HVBT stock comes in as a Moderate Buy, with one Buy assigned in the past three months.
The average HIVE price target is $3.17 per share, implying 8.9% downside potential from current levels.
HIVE has also been focused on green mining, which seems to be the future of cryptocurrency mining.
If cryptocurrencies continue to trend higher, the company will have ample financial flexibility to pursue expansion and diversification.
Overall, it seems that HVBT stock is positioned for upside from current levels, once more miners are deployed and revenue growth accelerates.
Disclosure: At the time of publication, Faisal Humayun was long on HIVE Blockchain.
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