Weak crypto market continues to haunt HIVE Blockchain, PI says

PI Financial analyst David Kwan continues to rate HIVE Blockchain (Quote, Chart TSXV:HIVE) a buy despite headwinds in the crypto mining space.

On Wednesday, HIVE reported its Q1, 2019 results. The company lost (US) $2.72-million on revenue of $10.72-million.

“I remain pleased with the progress made by Hive on the operational front and in regard to our financial position,” outgoing CEO Harry Pokrandt said. “We continue to deploy capital and have added an additional 6.8 megawatts of capacity in Sweden, as well as closed the acquisition of Kolos in the quarter. Financially, Hive generated positive cash from operations and took another step forward in growing the business. Our financial position has advanced despite challenging market conditions which have seen major cryptocurrencies come under pressure this year. We remain well capitalized and well positioned to achieve our goals of profitable deployment of capital to maintain our leadership position in the blockchain infrastructure industry.

Kwan says the results came in below his expectations, but believes there are some positives to take away.

“The weak cryptocurrency markets continue to overhang HIVE and other miners, as margins continue to contract (into negative territory for an increasing number of miners). HIVE is relatively well positioned compared to most other miners given its low costs, attractive jurisdictions, and strong cash and digital currency balance. There is also some optionality, as it looks to diversify its business into adjacent markets (e.g., video rendering, AI), most notably with its second Iceland facility and its Norway project.”

In a research update to clients today, Kwan maintained his “Buy” rating and one-year price target of $0.85 on HIVE Blockchain, implying a return of 10.4 per cent at the time of publication.

Kwan thinks HIVE will generate Adjusted EBITDA of (US) $8.8-million on revenue of $42.0-million in fiscal 2019. He expects those numbers will impove to EBITDA of $15.3-million on a topline of $54.9-million the following year.