Argo Blockchain (LSE: ARB) shares have fallen recently. Since I last covered the stock on 11 March, and discussed two UK growth stocks I’d rather buy, the ARB share price is down about 50%. That compares to gains of 17% and 15% for the two stocks I mentioned in that article.
Is this share price weakness a buying opportunity for me? Let’s have another look at the stock.
Argo Blockchain: latest news
News from Argo Blockchain has actually been quite encouraging recently. For example, in the company’s Q1 operational update posted on 7 April, Argo advised it had mined 165 Bitcoin or Bitcoin Equivalent (BTC) in March, compared to 129 BTC in February. Based on FX rates and crypto prices, this generated revenue of £6.6m for the month. That represented an increase of 50% on February revenue.
Overall, revenue for Q1 was £13.4m, making the period the best quarter since the company’s inception. “These numbers are incredible, and they highlight our continued commitment to smart growth, efficiency, and delivering meaningful value to our shareholders,” commented CEO Peter Wall.
Argo also recently announced it has partnered with DMG Blockchain Solutions to launch the first clean energy Bitcoin mining pool. This represents the first opportunity for the creation of ‘green Bitcoin’. This is another positive development, in my view.
So why has the ARB share price fallen?
So why the share price fall if news has been good (and the price of Bitcoin has risen)? Well, there are a few reasons.
Firstly, crypto exchange operator Coinbase has listed on the stock market. This means investors now have a new way to get indirect exposure to crypto. I imagine this has resulted in capital flowing out of Argo Blockchain shares.
Secondly, there’s been a recent shift towards high-quality tech shares. A lot of money has been going into stocks such as Apple, Alphabet, and Microsoft. Speculative small-cap tech stocks like Argo Blockchain have suffered.
Third, there continues to be regulatory uncertainty in the crypto space. For example, just recently, Turkey banned people from paying for goods with crypto.
Finally, the stock had had a huge run (up 33p to 245p in the first two months of the year) and its valuation was very high. When I covered ARB in February, for example, its market-cap was £856m. A significant pullback was always a possibility.
Argo Blockchain shares: should I buy now?
Looking at the investment case, Argo Blockchain still isn’t a buy for me, even after the big share price fall.
My main concern here is that there’s a lot of uncertainty around the future of Bitcoin. Is Bitcoin mining still going to be a booming industry in five years? I’ve no idea. It’s hard to make growth forecasts, which means the stock is very speculative.
Another concern is the lack of durable competitive advantage. As far as I can see, there’s nothing to stop competitors launching a similar Bitcoin mining businesses.
Additionally, the company isn’t yet profitable. As I explained yesterday, I like to invest in growth companies that are already profitable as I’ve found this reduces risk significantly.
All things considered, I think there are plenty of other growth stocks that are a better fit for my portfolio.