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2 Crypto Stocks Keep an Eye on As Bitcoin Nears All-Time Highs

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Bitcoin has been moving aggressively higher this past week and once again topped the $60,000 mark on Friday, closing in on it’s all-time high. Much of the reason for this rally is the announcement that the SEC approved a Bitcoin futures exchange-traded fund (ETF).

The prices of crypto mining stocks, such as Marathon Digital Holding Inc. (MARA) and Argo Blockchain Plc. (ARBK), are tethered to Bitcoin’s price changes, are therefore rallying as well.  Today I’ll examine both stocks to see if they have what it takes to keep rallying in Q4 2021.

Marathon Digital Holdings Inc. (MARA)

MARA operates as a digital asset technology company that mines cryptocurrencies with a focus on the blockchain ecosystem and the generation of digital assets in the United States.

Since the beginning of the year, MARA’s stock skyrocketed 368%, outperforming Bitcoin which has surged 77% year-to-date (YTD).

In terms of financials, MARA is expected to boost its net sales significantly in 2022, up more than 3x to $787m, but this growth is expected to decelerate steeply in 2023, up only 7.2% to $844m.

On the other hand, the crypto company should increase its bottom line considerably in the next two years. Additionally, its net income should jump more than 4x in 2022 to $436m, reaching a double-digit net margin of 55.4%.

The balance sheet of the company is expected to reach a small net cash position of $46m in 2022 and post a free cash flow of $342m in 2022, up nearly 8x year-on-year.

This bodes well for the company and should propel MARA’s shares to new highs, given that it will be the second consecutive year with a profit.

Moreover, the valuation metrics of MARA aren’t that stretched, after taking into account its strong growth profile. With a 2022e P/E of 10.5x and a 2022e EV/EBITDA of 7.54x, MARA’s current price is an opportunity for investors looking to get exposure to the cryptocurrency market.

Argo Blockchain Plc. (ARBK)

ARBK together with its subsidiary, Argo Blockchain Canada Holdings Inc., engages in crypto asset mining services worldwide. The company was incorporated in 2017 and is headquartered in London, the United Kingdom.

Since its recent IPO, ARBK’s stock has advanced a mere 1% in the two weeks the company has been public.

ARBK’s top line is anticipated to surge by nearly 4x this year to $79.3m, but analysts expect a deceleration of this growth in 2022, up only 10.8% to $87.9m. 

ARBK’s bottom line is expected to bounce significantly in 2021, from $1.44m in 2020 to $38.4m this year. Nevertheless, the cryptocurrency specialist’s earnings are expected to decline moderately next year, down 13.2% to $34.1m, which corresponds to a high net margin of 38.8%.

In terms of balance sheet, ARBK’s situation is less attractive than MARA’s. With net debt of $65.9m in 2021, which is expected to nearly double by 2022 to $120m, the company is more leveraged than its peers, but maintains a manageable debt level, representing a leverage ratio of only 1.7x in 2022.

Despite that, the company trades at a higher valuation than MARA, with a 2022e P/E ratio of 12.9x and a 2022e EV/EBITDA of 8.24x

Take away

Both companies are well-positioned to grow their revenues going forward and with Bitcoin approaching all-time highs, it will provide constructive momentum for their respective shares. As the price of the crypto giant surges, so too does the demand for services of companies such as MARA and ARBK, which will ultimately lead to higher revenue growth, should this trend continue.

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Cristian Docan

Cristian is an experienced investment analyst and financial writer. Prior to Wealthpop.com, Cristian spent three years as a consultant providing investment research and content to financial services companies and online publications on the Oil & Gas sector. Cristian enjoys researching and writing about stocks and the markets. He takes a fundamental, technical and quantitative approach in evaluating stocks for readers. Previously, Cristian was Power Portfolio Manager at Engie Global Markets. Cristian started his career in portfolio management at Société Privée de Gestion de Patrimoine, an independent wealth management firm. He received a Bachelor Degree in Economics and Management at Université Panthéon-Assas University and a Master of Science in Financial Markets at INSEEC Business School.

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