Vancouver-based HIVE Blockchain Technologies (TSXV:HIVE) is positioned to exploit its competitive advantage in the cryptocurrency mining sector, say GMP Securities analyst Deepak Kaushal, who has initiated coverage of HIVE with a speculative Buy rating and a price target of $5.35, representing an 88 per cent return at the time of publication.
“HIVE is a leader among a new class of blockchain miners that are building industrial-scale capacity, are focused on long-term value creation, and are capitalized via public markets,” says the analyst. “We believe HIVE offers investors unique exposure to the emerging blockchain sector with competitive advantage, high growth, free cash flow, attractive return on capital and diversification.”
HIVE is the largest publicly-traded blockchain miner worldwide, having begun currency mining this past September when it took over operations at Genesis Mining in Iceland. Focusing on mining Ethereum’s ether currency (the company also plans to extend its efforts into other cryptocurrencies such as bitcoin and z-cash), HIVE recently added facilities in Sweden, bringing its overall operations to 10.6 MW of power, with a further 13.6 MW of GPU mining potential projected to be operational by April.
HIVE began trading last September through a reverse takeover of Leeta Gold Corp., where its stock price jumped 220 per cent on the initial day of trading. Share prices rose from $0.96 to $5.37 by November but have stayed in the $3 range over the past two months.
Kaushal says that although currency mining and the blockchain technology behind it are still emerging fields, the breadth of impact that blockchain will have on the world’s financial systems will be enormous.
The analyst thinks HIVE will generate EBITDA of $9.7-million on revenue of $27.5-million in fiscal 2018. He expects those figures will climb to EBITDA of $199.4-million on a topline of $260.2-million the following year.
The analyst says that there is above-average volatility and risk involved in early-stage technology which merits HIVE’s speculative Buy rating.
“For investors, we see a new, high-risk high-reward sector that has low correlation to other investment classes,” he says. “We see miners as essential infrastructure providers for blockchain networks that can build diversified portfolios of cryptocurrencies at attractive returns- on-investment.”