The London-based cryptocurrency miner, Argo Blockchain (NASDAQ:ARBK) (GB:ARB), is under duress as its mining operations continue to weaken. Roth Capital analyst Darren Aftahi remains concerned about the elevated oil and gas prices at its Helios, Texas mining facility. The higher prices are impacting the company’s margins. ARBK stock has plunged 84.1% so far this year.
Amid the operational limitations, the company announced the exit of Perry Hothi, its Chief Technology Officer. Moreover, Argo shocked investors with its plan to increase liquidity by raising ~$27 million through an additional share sale to a strategic investor.
Argo’s September Mining Update Fails to Impress
In September, Argo produced 215 bitcoin (BTC-USD) or bitcoin equivalents (BTC), declining 8.5% over August 2022 production. As of September end, Argo held 512 bitcoins. Notably, the company maintained a hashrate capacity of 2.5 exahash per second (EH/s) in September, akin to August.
The company noted that the installation of the new Bitmain S19J Pro machines at its Helios facility is expected to be completed by October end. Combined with the new installations and sales of 3,400 mining machines in October, Argo expects its total hashrate capacity to increase to 2.9 EH/s.
Remarkably, Argo’s mining margins improved to 25% in September, up from 20% recorded in August, while generating $4.27 million in mining revenue (down from $5.23 million in August).
Aftahi Reduces Targets Post Operational Update
Analyst Aftahi drastically cut the price target on ARBK to $2 (almost fairly traded at current levels) from $10, while also lowering the rating to Hold from Buy.
The analyst is disappointed with Argo’s hashrate expectation reduction from 3.2 EH/s to 2.9 EH/s in October. Furthermore, Aftahi is not happy with Argo’s reliance on machine sales to shore up its balance sheet alongside the stagnant BTC yields.
Aftahi noted, “While ARBK may have taken steps to potentially help strengthen its balance sheet, elevated power costs (we estimate double q/q) still remain a dark cloud in the distance, despite talks around a fixed PPA (especially when considering power costs remain very elevated with limited relief on natural gas prices in sight compared to historical levels).”
Is ARBK Stock a Good Buy?
On TipRanks, Argo Blockchain stock has a Moderate Buy consensus rating. This is based on two Buys versus two Holds. The average Argo Blockchain price target of $5 implies a massive 147.5% upside potential to current levels.
Ending Thoughts
Argo Blockchain needs to improve its operations through bitcoin mining progress rather than just machine sales. Aftahi has drastically changed his view on ARBK stock, implying a cautious outlook for the stock’s trajectory.
