Shares of bitcoin-mining device maker Canaan (NASDAQ:CAN) plunged on Monday after the company delivered its results for the third quarter. Revenue was down sharply and it reported a loss. Considering the stock was up by more than 150% in just the past month, it's not surprising to see it give back some of those gains. At the close of trading, Canaan stock was down 13%.
In Q3, Canaan's revenue plummeted nearly 76% year over year to $24 million. In terms of computing power, sales were only down about 21%. But the average selling price for that computing power was down sharply as the company offloaded old inventory on the cheap. All told, the company booked a net loss of $12.7 million.
Canaan's management said demand for its equipment is returning, and that presale orders were on the rise heading into the fourth quarter. It also focused its communication on its research and development spending in artificial intelligence. In other words, management tried to focus on future potential -- and there may indeed be some. But that didn't make Q3 results any easier to swallow for this cryptocurrency stock.
Canaan's products are primarily used by bitcoin miners. A bitcoin transaction is made possible by computers racing against each other to validate a transaction. As a reward for performing this voluntary service, the first computer to complete the process for a given block of transactions is paid in newly issued bitcoin. This is called mining and has a significant real-world cost in equipment and electricity. Estimates vary, but some believe the price of 1 bitcoin needs to be above $15,000 for miners to simply break even right now.
The good news for Canaan is the price of a bitcoin is above $19,000 as of this writing. This means the prospect of mining bitcoin could be getting more enticing. If the price holds or even rises further from here, it could motivate new miners to go out and purchase Canaan's equipment.