Why has Argo Blockchain stock soared?
It’s been a few days to appreciate Argo Blockchain (LSE: ARB). At the time of writing on Thursday morning, the Argo Blockchain share price has risen 66% in just five days.
In the longer term, however, the picture also looks dramatic – but in a less rosy way. Even after the recent sharp rise in value, the shares are still 82% lower than a year ago.
Dodgy drivers
So why has the share price risen recently?
The answer is not entirely clear, in my opinion. It is true that some cryptocurrencies including Bitcoin have increased in value recently. Bitcoin, for example, has risen 8% in the past five days. As a core part of Argo’s business strategy and asset base, an increase in Bitcoin value should help boost its share price. But an 8% increase in Bitcoin values hardly explains why Argo shares have jumped by two-thirds.
In reality, there has been no concrete news from Argo in the last few days which I believe helps to explain the jump. The last material news from the company was released over two weeks ago. It was simply the company’s regular monthly update. Mining profits were up from last month, but this 6% increase was not particularly noteworthy, especially since it largely just reflected a change in the dollar to pound exchange rate compared to last month.
It could be that, with the Argo price well below previous levels and trading in pennies, bargain hunters have pushed the share price up in recent days. For now, at least, I see no other clear reason to explain the strong upward movement.
What’s next for the Argo Blockchain share price
If that is the case, it is unclear whether such positive momentum can continue. Recent gains in Argo Blockchain stock can be reversed.
As an Argo shareholder and long-term investor, simply hoping that changes in investor momentum push the price up in the short term is not the kind of strategy that can help me sleep comfortably at night.
Instead, I would hope for a set of concrete reasons to believe that the investment case is becoming more robust, which could support an increased share price.
My move
It can happen. For example, if crypto prices continue to move up, it could help both the value of Argo’s crypto assets today and the economics of the mining business in the future.
But the company has been sailing through choppy waters lately. It announced this month that it is selling thousands of unused mining machines and raising cash to boost liquidity. That suggests there is a risk that existing shareholders could be further diluted as the company tries to strengthen its balance sheet. It also casts doubt on the viability of the firm’s business model.
It could be bad for the share price. I am not buying any more shares for now. Instead, I’m watching to see if Argo releases any news that helps boost my confidence in the long-term investment case. If that doesn’t happen in the coming months, I will consider selling my shares.
The post Why has the Argo Blockchain share price risen? appeared first on The Motley Fool UK.
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The 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.
C Ruane holds positions in Argo Blockchain. 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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