Why is the Argo Blockchain (ARB) share price still falling?

first_imgWhy is the Argo Blockchain (ARB) share price still falling? Are you on the lookout for UK growth stocks?If so, get this FREE no-strings report now.While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.And the performance of this company really is stunning.In 2019, it returned £150million to shareholders through buybacks and dividends.We believe its financial position is about as solid as anything we’ve seen.Since 2016, annual revenues increased 31%In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259Operating cash flow is up 47%. (Even its operating margins are rising every year!)Quite simply, we believe it’s a fantastic Foolish growth pick.What’s more, it deserves your attention today.So please don’t wait another moment. Simply click below to discover how you can take advantage of this. Alan Oscroft has no position in any of the shares mentioned. 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Enter Your Email Addresscenter_img Our 6 ‘Best Buys Now’ Shares Image source: Getty Images Would I buy Bitcoin? No. Would I buy shares in Argo Blockchain (LSE: ARB)? Maybe. That might sound strange, so I’ll explain. To me, it’s similar to gold. I won’t buy gold, because it’s a straight gamble on where the gold price might go next.But a gold miner is different. Based on a range of possible gold prices, we can estimate some sort of base level for the long-term profits a miner might make. Similarly, it should be possible to come to some sort of rational valuation for the ARB share price, shouldn’t it?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…It’s not easy right now. Rather than any fundamental valuation based on profits, the Argo Blockchain share price is really just following where cryptocurrencies are going. Bitcoin has soared in 2021, but it’s fallen back some way since its high in April. And that’s what ARB shares have done too.It seems it’s all down to Elon Musk. Tesla accepts Bitcoin in payment for cars? Buy Bitcoin. Oh, Tesla won’t take it any more? Sell Bitcoin. He says Tesla might sell its Bitcoin holdings, then he says it hasn’t… you get the picture.It seems crazy to me to value something based on whatever one person happens to tweet in any one day, even someone as successful and charismatic as Musk. But that’s the way the cryptocurrency world seems to work.ARB share price down againArgo Blockchain ended Tuesday down 5.8%, at 130p. That’s still a climb of more than 2,500% over the past 12 months. But the price hit a peak of 360p at on 26 March, and has since plunged 65%. That suggests it’s hugely risky buying into a crypto mining stock, way more than a gold mining stock.To get back to my gold miner comparison, I’d value a mining stock based largely on the cost of extraction per ounce. I’d examine historical gold prices, and work out what margins the miner might make at various levels. And if I think there’s still decent profit even if gold falls significantly, I’ll seriously consider buying the shares.I’d want to see the share price trading at a discount to what I think the underlying profits might be like. But that’s not happening with the ARB share price.Speculative valuationAt the end of April, Argo held a total of 936 Bitcoin, or Bitcoin equivalent (BTC). And it was mining at a rate of around 1,970 BTC per year. The company’s current market-cap stands at a fraction under £500m, or about the equivalent of 16,600 Bitcoin.Mining at current rates would take around eight years to generate enough BTC to match the firm’s valuation. Well, presumably longer, as it costs money to run all the computers.I know Argo plans to raise its production rate, but that will cost more money. And, right now, the ARB share price still appears to value the company based solely on the speculative future value of Bitcoin. It’s not based on any proven sustainable profits the company might make.Should that happen, that’s when I’ll consider buying. See all posts by Alan Oscroft I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Alan Oscroft | Wednesday, 19th May, 2021 | More on: ARB last_img

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