Benchmark Sees Canaan as Indirect Investment in Bitcoin, Shares Gain

Canaan (CAN) is an indirect way of investing in the growth of bitcoin (BTC) as it benefits from being the second-largest player in the “oligopolistic bitcoin mining equipment industry,” Benchmark said in a research report Tuesday. It initiated coverage of the Nasdaq-traded stock with a buy rating and a $9 price target.

The Beijing-based company is a play on any rebound in the price of BTC as product demand is highly correlated with the price of the cryptocurrency, the broker said. Miners earn rewards in BTC, which impacts the return on investment on mining machines and influences demand and profitability.

Canaan is well positioned for a cyclical rebound with a robust $400 million in cash and a new mining initiative, Benchmark said. The current $100 million stock buyback will help support the stock through the “current crypto winter,” it added.

The broker is positive in its long-term view of the crypto industry. While Canaan’s operations will fluctuate along with BTC, Benchmark says “Bitcoin is here to stay and long-term trends are favorable.”

Risks to the investment case include the threat of new crypto regulations, the volatility of BTC, China-U.S. relations, and continued Covid pressures, the report added.

The stock gained over 7% on Wednesday to $4.08 at time of publication.

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