This stock is ‘well positioned’ for the upcoming Bitcoin bull market: Rosenblatt

Investing.com — Rosenblatt analysts initiated coverage of Canaan (NASDAQ: CAN) with a Buy rating in a note Wednesday, highlighting the company as well positioned to capitalize on what it sees as the upcoming bull market.

“We view Canaan’s position in front of the coming Bitcoin bull market as compelling,” said Rosenblatt.

Investing.com — The firm set a 12-month price target of $3.00 on the stock, citing Canaan’s advanced ASIC chip technology and strategic approach to Bitcoin mining as key drivers of future growth.

Canaan’s advanced ASIC chips, which power Bitcoin mining rigs, offer “superior performance, energy efficiency, and ruggedness.”

According to Rosenblatt, these new systems have already doubled revenue sequentially following the April 2024 Bitcoin halving event.

The analysts also expect increasing demand for Canaan’s next-generation mining rigs, including the A15 and A16 models, which are set to roll out over the next few years.

Rosenblatt explains that one of Canaan’s notable strategies is to expand its self-mining operations, which are more profitable than selling rigs alone.

The company’s ruggedized rigs are designed to mine Bitcoin in low-cost, harsh environments like West Texas and the Middle East, which further enhances their profitability.

“We believe Canaan’s shares are undervalued, at 0.6x EV/Sales compared to 3.9x for its peer group,” adds Rosenblatt.

This undervaluation is said to be partly due to profitability concerns and the perception of Canaan as a commodity hardware supplier.

“As Canaan executes its strategy of using internally developed hardware for self-mining and benefits from a Bitcoin bull market, we expect its valuation to increase,” states the firm.

They believe Canaan could be valued similarly to co-location data center managers, especially as the Bitcoin mining industry increasingly relies on low-cost power facilities.

Rosenblatt concludes: “We recommend owning shares of Canaan based on several key drivers: the rising Bitcoin hashrate and price appreciation, driving heightened demand for Canaan’s next-generation mining rigs (A14, A15, A16); Canaan’s strategic focus on expanding its more profitable self-mining operations with a focus on North America; and Canaan’s ruggedized rigs which enable mining in low-cost, harsh environments.”