On the back of dropping cryptocurrency prices, HIVE Blockchain (TSXV:HIVE) just got a target price cut from PI Financial’s David Kwan, who in a corporate update to clients today reiterated his “Buy” rating with a new target of C$0.85 (was C$1.30).
Cryptocurrency miner HIVE Blockchain recently announced that its new ASIC-powered bitcoin facility will be opened in North America rather than the previously planned Sweden. HIVE says the move is due to cheaper power costs in N.A. and that the added 200 PH/s (petahash per second) hash rate will be made up in the meantime through a cloud hosting agreement, starting on September 30.
Kwan says he views the move as slightly positive.
“The expansion of its operations into North America further diversifies HIVE’s mining operations, with existing facilities in Iceland and Sweden along with the potential for expansion in Norway via the Kolos acquisition,” says Kwan. “Accordingly, HIVE will have a diverse base of operations in three (or four, if/when Norway gets off the ground) relatively politically stable jurisdictions.”
The analyst has lowered his revenue and EBITDA estimates to reflect the pullback in crypto prices, which he says could make mining activity unprofitable for an increasing number of operations and could lead to a slowdown or a decline in network hash rates and difficulty in cryptomining.
For FY19, Kwan expects HIVE will generate Adj. EBITDA of $12.2 million (was $20.9 million) on revenue of $44.2 million (was $53.0 million) and for FY20, he expects Adj. EBITDA of $14.9 million (was $20.0 million) on a topline of $54.8 million (was $60.6 million).
Kwan’s target is based on a 12x CY19 Adj. EBITDA estimate and represents a projected 12-month return of 19.7 per cent.