The Argo Blockchain share price: is it too late for me to buy the stock?

At the time of writing, the Argo Blockchain (LSE: ARB) share price is trading at an all-time high. The stock is up more than 500% year-to-date, and more than 5,100% over the last 12 months. 

Some analysts predict that this could be just the start of an extended run higher for the stock. With that in mind, I’m wondering if it should buy the shares today, based on the company’s long-term potential. 

Argo Blockchain share price outlook

Argo Blockchain has become somewhat of a proxy for the Bitcoin price in recent months. The group mines and owns cryptocurrency, which means its profits and sales track the price of the commodity produced just like any traditional mining business. 

And as the value of Bitcoin has surged, so has the Argo Blockchain share price. 

This could continue if the cryptocurrency’s biggest bulls are proven correct. Some analysts have speculated that the price of Bitcoin could hit $500,000 in the long run. If this sort of growth materialises, shares in Argo could rise substantially from current levels. 

However, that’s a big IF. As Bitcoin is only worth as much as other investors are willing to pay for it, it’s impossible to tell what the future holds for the cryptocurrency. We can only go on what we know today. 

What we do know is that Argo Blockchain has tens of millions of dollars worth of Bitcoin on its balance sheet, and it’s ramping up mining activity. 

What we know 

According to its latest trading update, Argo has mined 129 Bitcoin, or Bitcoin Equivalent (BTC), generating revenues of $6.8m in the process for the year so far. It also owns 599 BTC.

This could be worth as much as $32m, although the company didn’t break down the split between Bitcoin and Bitcoin Equivalent, making it difficult to calculate an exact value. 

These figures imply the corporation can generate around $84m, although this is only an estimate. If it can reach $100m a year in revenues, the company, which currently has a market capitalisation of £1bn ($1.4bn), doesn’t look cheap. But it doesn’t look expensive either. There’s no guarantee the firm will be able to hit this revenue target. 

These figures suggest the Argo Blockchain share price is changing hands at around 14 times sales. The entire US technology sector is changing hands at six times sales. This suggests Argo looks expensive, but the valuation doesn’t consider potential growth, as I mentioned above. 

The bottom line 

Overall, at the time of writing, the Argo Blockchain share price looks expensive. That’s based on what we know already. Unfortunately, it’s impossible to predict the future.

The business faces a host of other risks as well. Mining cryptocurrency is highly competitive and energy-intensive. These challenges may push up costs for the group, which would hit profits. Management is also spending a lot on growth at the moment. This may also weigh on profitability in the long term. 

As such, I don’t know if the company will be able to grow into its valuation. If the Bitcoin price continues to rise, the stock may be cheap today. If it falls, the stock will likely decline in value. 

Considering this level of uncertainty, I wouldn’t buy the stock for my portfolio today.