Please ensure Javascript is enabled for purposes of website accessibility

Why Canaan's Stock Dropped 13.8% on Wednesday

By Travis Hoium – Sep 15, 2021 at 4:28PM

Key Points

  • Second-quarter results are out and growth of over 500% wasn't enough to please investors today.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Earnings were great, but the market sold off the stock anyway.

What happened 

Shares of computing solution and Bitcoin (BTC 2.51%) mining supplier Canaan (CAN 1.27%) fell as much as 13.8% in trading on Wednesday after the company announced second-quarter 2021 financial results. Shares closed the day down 10.6%. 

So what

Management said revenue for the quarter ended June 30 was $167.5 million, up 507.3% from a year ago. Gross profit was $66.2 million and net income was $37.9 million, or $1.45 per share.

A bitcoin logo against a rendering of a motherboard.

Image source: Getty Images.

Guidance for the third quarter, which is almost over, is for revenue to increase sequentially by 10% to 30%. The market's growth rate is definitely slowing, although a double-digit sequential growth rate is still phenomenal for any business. 

Now what

Investors clearly expected a little more from Canaan but given the incredible rate of growth and high profitability, I see a lot to like. There are clearly heavy tailwinds in both the cryptocurrency business and also augmented reality, where Canaan is also developing products. 

As with many crypto and artificial intelligence stocks, there can be huge swings in the stock based on any bit of news. Today, I think investors got good news from Canaan and this could be a buying opportunity. With that said, the volatility in cryptocurrencies and the slow supply of silicon for chips could pose challenges in coming quarters. Today looks great, but stay on top of the company's earnings trends because that's the true indicator of where shares are likely headed long-term. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Canaan Inc. Stock Quote
Canaan Inc.
$2.40 (1.27%) $0.03
Bitcoin Stock Quote
$16,879.86 (2.51%) $413.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.