Shares of crypto-mining veteran Bitfarms (BITF 21.03%) closed Monday's trading session 9% higher, after rising as much as 16.5% in the early afternoon. The Toronto-based company reported its second-quarter results before the opening bell. The numbers were rough but the report could have been worse.
Analysts expected a net profit of $0.05 per share on revenue near $48.3 million. Instead, Bitfarm reported sales of $41.8 million and a net loss of $0.70 per diluted share. Falling Bitcoin (BTC -0.29%) prices in the first half of 2022 undermined Bitfarm's operating model.
At the same time, the company's Bitcoin mining activity clocked in at 1,257 freshly minted Bitcoins, up from 500 coins in the year-ago quarter. Production costs per Bitcoin increased by 10%. And Bitfarm continues to ramp up its mining efforts, doubling its production volume in one Quebec facility and moving closer to opening two new sites in Argentina. The company clearly hasn't given up on the idea of higher Bitcoin prices in the future.
A bit of optimism was all it took to drive Bitfarm's stock higher today because investors had extremely low expectations. Bitfarms shares closed Friday's trading 79% below last November's 52-week highs.
The report gave bears plenty of support, including the soft top-line growth and the fact that Bitfarms sold more Bitcoins than it mined during the second quarter. Bitfarms can't afford to run its business in this way forever, because it would run out of Bitcoins and require additional financing within a couple of quarters.
However, the company has developed a sturdy operating model with a generous gross profit margin even in this Bitcoin downturn. Don't forget that Bitcoin prices have doubled in two years, even after the recent declines. Based on Bitfarms' ability to survive the colder crypto winters of the past, it could very well make it through another one and deliver strong returns in the next crypto market upswing.