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Why Canaan Stock Crashed Today

By Jon Quast - Updated Apr 12, 2021 at 1:41PM

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The company is probably excited to finally put 2020 behind it.

What happened

Shares of Canaan (CAN 0.31%) crashed on Monday after the company reported final financial results for 2020. As of 1 p.m. EDT, the stock was down a painful 28%.

So what

Canaan had almost nothing to show for its fourth-quarter efforts. The company sells equipment used for mining cryptocurrencies, which investors might assume would be in high demand. And in a way that's true -- the company currently has $174 million in contracts, causing it to run at capacity for the remainder of 2021. However, there isn't much demand for old inventory, which is what Canaan's been working through. 

A frustrated person lays their head down on a table with a down stock chart in the background.

Image source: Getty Images.

Canaan generated just $5.9 million in revenue in Q4 and only $68.6 million for full-year 2020. Its Q4 revenue was down 82% year over year. However, if there's a silver lining, the average selling price of its mining machines was up when compared to earlier in the year. That said, it still incurred a hefty net loss of $11 million. While none of this was entirely unexpected, it seems investors are having second thoughts about Canaan stock in light of these results.

Now what

Things should be much better for Canaan in 2021. The semiconductor company expects revenue of at least 400 million Chinese yuan (around $61 million) in the first quarter of 2021, which is almost as much as what it generated in all of 2020. And, if the cryptocurrency market remains strong, it could generate revenue like this throughout the year. However, it's harder to have precise expectations for profitability, as the market factors that affect the price of its mining machines fluctuate. 

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