Is penny stock Argo Blockchain a cheap buy at 15p?
Penny stocks are notoriously volatile, and perhaps no more so than companies involved in cryptocurrency mining. London Stock Exchange– listed company Argo Blockchain (LSE: ARB) is a good example.
The share price has more than doubled since the start of January, reaching 15p today. Still, that’s still a massive 80% decline from where the penny stock was trading a year ago.
So, should I invest in this Bitcoin mining stock today? Here is my opinion.
Bitcoin price recovery
The Argo Blockchain share price is linked to the price of Bitcoin. In that context, the most important factor behind the company’s positive start to the year is the crypto market, led by a 48% Bitcoin price rally against the value of sterling in 2023.
A return to a “risk on” environment in crypto markets is good news for the firm. Several analysts are bullish on Bitcoin’s prospects as the digital currency approaches its next halving event in 2024. Historically, halving events have been bullish for the Bitcoin price.
Bitcoin is an extremely volatile asset. This translates to similar volatility for Argo Blockchain shares. When times are good, this can result in huge gains, but when times are tough, the losses can be just as great. It is a very high risk/reward stock in my view.
Positive momentum
In a recent encouraging development, the company has regained its Nasdaq listing. To retain its place in the technology-heavy stock market index, closing bids for the firm’s American Depository Shares must remain above $1 for 30 days.
After last year’s brutal crypto winter, Argo Blockchain broke this requirement. However, it regained compliance in January. This is important for the company’s reputation and to maintain exposure to institutional investors.
In addition, I also like the long-term ethos. The company aims to support the adoption and verification of 100% renewable energy blockchains by 2025. Given that Bitcoin mining’s environmental impact is a major drawback of investing in the industry, I am pleased to see Argo Blockchain’s commitment to improving its ESG risk assessment.
Challenges
I am very aware that there are significant risks to this penny stock. The collapse of cryptocurrency exchange FTX last year is proof of how feverish the sector can be. In fact, Argo Blockchain narrowly avoided bankruptcy itself in December by selling the Helios mining facility to Galaxy Digital Holdings for 54 million pounds.
In addition, the firm currently lacks clear leadership following the recent resignation of founder and CEO Peter Wall. His departure comes at a bad time considering that US financial authorities are pursuing aggressive regulatory actions in the crypto market. As the country’s banking system is closed down, some fear that the entire industry could be threatened.
Should I Buy Argo Blockchain Shares?
Argo Blockchain shares offer the potential for huge gains. Their stellar performance this year to date proves it. The other side of the coin is the possibility of huge losses, or even bankruptcy.
Overall, I view this penny stock as a very speculative investment. Currently, I am looking for lower risk stock market opportunities, so I will not be buying Argo Blockchain shares today.
The content of this article is provided for informational purposes only. It is not intended to be, nor does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which have several risks, including total loss of invested money. Readers are responsible for performing their own due diligence and for obtaining professional advice before making investment decisions
The post Is penny stock Argo Blockchain a bargain at 15p? appeared first on The Motley Fool UK.
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Charlie Carman has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the stocks mentioned. Views on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we provide in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
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