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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.

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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.

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Stocks Mentioned

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

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