Canaan (CAN 16.38%) is among the leading Bitcoin mining-related stocks and it's been hard to digest, partly due to a very volatile share price that has moved sometimes out of tandem with the core token the company mines.
NASDAQ: CAN
Key Data Points
As the chart above shows, depending on the time frame investors are looking at, it's either good or bad news for this holding. Since yesterday's close, shares of CAN stock are down 16% as of 2:20 p.m. ET. And on a year-to-date basis, Canaan has declined 34% at the time of writing.
However, over the course of the past 12 months, it's up 58%, which exemplifies just how volatile things have been for Canaan.
Let's dive into what's driving this volatility and what investors should make of this daily move.
What's driving Canaan lower today?
Bitcoin mining-adjacent companies like Canaan certainly do provide leveraged exposure to the underlying commodity they mine: Bitcoin. And with Bitcoin down on the day, the recent Bitcoin halving, and other technological factors at play (such as the rising price of power in many parts of the world), the company has felt fundamental pressures that do appear to still be playing into the company's recent streak of weakness.
A recent note from analysts at B. Riley pushes a thesis that Canaan is unlikely to be profitable this year, with the company turning profitable in 2027. That said, given the company's net margin of negative 77% and return on equity of more than negative 92%, this is a stock that fundamentals-oriented investors may simply be steering away from, until the tide turns.
What's also interesting to me is that despite strong orders announced earlier this month, as well as the announcement of a new and more efficient Bitcoin mining machine, Canaan has yet to see the kind of surge some investors have been hoping for.
My view is that for now, investors looking to play a rising tide in the cryptocurrency sector will continue to do so via owning these tokens outright, or via a spot exchange-traded fund (ETF). Crypto miners, and mining equipment makers like Canaan, just seem too risky to invest in with fundamentals that don't support an investment thesis at this point in time.
