Why Is Bitfarms Losing All Its Gains?
Bitfarms added digital infrastructure to its offering of services, but the addition comes with a hefty price tag.
Quick overview
- Bitfarms Ltd. (BITF) experienced a 1.64% decline in stock price, dropping to $3.60 amid a prolonged retreat.
- After a strong performance in September and October, the stock has lost 44% of its value due to a shift from Bitcoin mining to digital infrastructure services.
- Despite a year-over-year revenue growth of 87% in Q2, the company reported a net loss of $29 million, raising concerns about its profitability.
- Investors are cautious ahead of the upcoming quarterly earnings report on November 13th, as the company's split focus on cryptocurrency and infrastructure may hinder financial stability.
On Monday, Bitfarms Ltd. (BITF) fell another 1.64%, bringing the stock price to $3.60. What looked at first like a correction has become a full blown retreat for the stock.
For a full month from the middle of September to the middle of October, Bitfarms performed extremely well and rose from $1.28 to $6.47 per share. Then, the company saw its stock fall off sharply, but it did not stop with a minor price correction. BITF has been in decline for weeks at this point and lost 44% of its value.
The decline is going on longer than anticipated, taking the once high performing stock down considerably. This all comes as a result of the company switching over from Bitcoin mining to offering digital infrastructure services.
Bitfarms’ Bold Move May Not Pay Off
Bitfarms has jumped into the high-performance computing infrastructure niche and has invested heavily to make this shift happen. This move continues a long-running problem with the company, though- they cannot seem to make money despite their major investments. They are known for operating at a loss or breaking even a lot of the time with their Bitcoin mining services, and so far, their move to digital infrastructure has not changed things for them.
Bitfarms is scheduled to release their quarterly earnings statement on November 13th for Q3. This will give investors a better idea of where they are at, but investors should keep in mind that the move to infrastructure is relatively new and may not show up on revenue reports much just yet.
Bitfarms is invested in cryptocurrency production still, but they have expanded into energy and data centers too, and the split focus could hurt them. The company has yet to prove that it can be profitable, which is why many investors are showing their concern over this stock as the price plummets.
In Q2, the company grew their revenue from year to year by 87%. However, their net loss for the second quarter was $29 million, so even though they are bringing the sales, they are not making a profit with their business model. They are slipping into further debt with the conversion of their property to handle digital infrastructure, and Bitfarms may not have a very good profit margin to show for the coming quarterly earnings report.
We will see in a few days if the company is burning through its money for a lost cause or if they are receiving a large enough slice of this splintered, highly competitive market to make the move worthwhile. Right now, it is not looking good, and investors may not want to hold onto this stock until the company is on better footing.
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