Canaan's Solid Operations Recognized, Wall Street Investment Firm Rosenblatt Gives "Buy" Rating

Rhea-AI Summary

Canaan Inc. (NASDAQ: CAN) has received a 'buy' rating from Wall Street investment firm Rosenblatt, with a $3 price target over the next 12 months. The firm views Canaan as promising in light of the upcoming Bitcoin bull market. Rosenblatt notes that Canaan is significantly undervalued, trading at 0.6x EV/Sales compared to 3.9x for its peer group. The report highlights Canaan's strategy of expanding self-mining operations, particularly in North America, aiming to increase capacity from 0.65EH/s to 10EH/s by H1 2025. Canaan's Avalonminer products, known for their durability and efficiency, are expected to see increased demand. The company's extensive patent portfolio and focus on energy-efficient mining solutions are seen as key strengths.

Positive

• Received 'buy' rating from Rosenblatt with a $3 price target
• Expanding self-mining operations, aiming for 10EH/s capacity by H1 2025
• Avalonminer products seeing increased demand post-Bitcoin halving
• Extensive patent portfolio in ASIC chip technology and HPC
• Focus on energy-efficient mining solutions enhancing competitive edge

Negative

• Currently undervalued compared to peer group, trading at 0.6x EV/Sales vs 3.9x
• Concerns about the company's profitability
• Perceived primarily as a hardware provider, potentially limiting valuation

Insights

Financial Analyst

Rosenblatt's "Buy" rating and $3 price target for Canaan (CAN) is a positive signal, but investors should approach with caution. The 400% upside from current levels suggests significant undervaluation, trading at 0.6x EV/Sales vs. peers at 3.9x. However, this gap stems from profitability concerns and perception as a hardware provider.

The planned expansion of self-mining capacity from 0.65EH/s to 10EH/s by H1 2025 could be a game-changer, potentially boosting predictable revenues. Yet, execution risks remain high in the volatile crypto market. The company's focus on energy-efficient solutions and ruggedized rigs for harsh environments could provide a competitive edge, but it's important to monitor market adoption and operational efficiency.

Tech Expert

Canaan's tech strategy shows promise but faces challenges. As the creator of the first Bitcoin ASIC chip miner, they have a strong foundation. The doubling of A14-based rig revenue post-halving is encouraging and the upcoming A15 and A16 series could maintain momentum. However, the crypto mining hardware market is fiercely competitive.

Their extensive patent portfolio in ASIC and HPC tech is a valuable asset, potentially shielding them from competitors. Strategic alliances for innovation are smart moves, but success depends on translating R&D into market-leading products. Investors should watch for concrete results from these partnerships and how Canaan's tech stack evolves in response to market demands and energy efficiency pressures.

Market Research Analyst

Canaan's pivot towards self-mining operations, especially in North America, aligns with market trends but carries risks. The Bitcoin bull market could indeed drive demand for mining machines, benefiting Canaan. However, the cyclical nature of crypto markets means this demand can quickly evaporate.

The focus on ruggedized rigs for harsh environments is a clever niche strategy, potentially opening up new markets in regions like West Texas and the Middle East. This could provide a competitive advantage and more stable revenue streams. Investors should monitor the success of this strategy in terms of market share gains and revenue diversification. The company's ability to balance hardware sales with self-mining operations will be important for long-term stability and growth.

SINGAPORE, Sept. 12, 2024 /PRNewswire/ -- Canaan Inc. (NASDAQ: CAN) has been recognized for its solid operations by Rosenblatt, a Wall Street investment firm that defines Canaan Inc. as "promising" in light of the upcoming BTC bull market, and initiating with a "buy" rating and a $3 price target for its stock over the next 12 months. The report shows that Canaan is significantly undervalued, trading at 0.6x EV/Sales, compared to 3.9x for its peer group, an undervaluation that stems from concerns about the company's profitability and its perceived role as a hardware provider. However, As Canaan adjusts and continues to execute its strategy of expanding self-mining operations—using internally developed hardware in low-cost areas, and Canaan's star products Avalonminer's product features, resistance to corrosion,  salt and humidity, which helps it mine in low-cost and harsh environments, such as West Texas in the U.S and in the Middle East regions, the company is expected to benefit from bitcoin bull market. Rosenblatt expects its valuation to rise and come closer to the valuations of co-location service data center operators.

The agency's report concludes:

- BTC Bull Market Opportunity to Drive Demand for Mining Machines: As the creator of the world's first Bitcoin ASIC chip miner, Canan's Avalonminer offers superior performance, energy efficiency, and durability. Demand for the A14-based rigs doubled revenue sequentially in 2Q24 following the April 2024 Bitcoin halving event; demand for Avalonminers A15 series and the upcoming A16 series in the product pipeline will continue to rise as Canaan continues to push the boundaries of its products.

- Adjusting Strategy to Focus on Expanding Self-mining Facilities, particularly in North America: Canaan's management plans to increase captive mining capacity in North America from the current 0.65EH/s to 10EH/s by H1 2025, which is considered as an important move to vigorously develop captive mining revenues in a predictable growth market. In addition, Canaan is prioritizing the development of energy-efficient mining solutions. This not only positions the company favorably among environmentally conscious customers, but also enhances its competitive edge in the market.

- Extensive Patent Portfolio: Canaan's strategy for sustainable growth includes a robust patent portfolio, with numerous patents related to ASIC chip technology and HPC. This intellectual property forms the backbone of Canaan's competitive advantage and supports its long-term growth strategy.

- Actively Exploring Strategic Alliances and Partnerships: In addition, Canaan actively collaborates with other technology firms and research institutions to drive innovation and expand its market reach. These partnerships enable Canaan to stay at the forefront of technological advancements and offer cutting-edge solutions to its customers.

- Conclusion: Rosen Blatt recommends owning shares of Canaan based on several key drivers: the rising Bitcoin hash rate and price appreciation, driving heightened demand for Canaan's next-generation mining rigs; Canaan's strategic focus on expanding its more profitable self-mining operations with a focus on North America; and Canaan's ruggedized rigs which enable mining in low-cost, harsh environments.

Rosenblatt is a research and investment banking boutique and agency focused on institutional brokers, providing specialized services in financial services, market structure and research.

In light of the 3-parties' rating report, Canaan believes it offers a promising outlook for the company's future growth potential and a positive recognition of its value. It could potentially contribute to enhancing public investor confidence, maintaining the company's share price, and improving its capital market image, which could in turn facilitate the company's long-term development.

About Canaan Company: Established in 2013, Canaan Inc. (NASDAQ: CAN) is a technology company focusing on ASIC high-performance computing chip design, chip research and development, computing equipment production, and software services. Canaan has extensive experience in chip design and streamlined production in the ASIC field. In 2013, under the leadership of Mr. Nangeng Zhang, founder and CEO, Canaan's founding team shipped to its customers the world's first batch of mining machines incorporating ASIC technology in bitcoin's history under the brand name, Avalon. In 2019, Canaan completed its initial public offering on the Nasdaq Global Market. Contact pr@canaan-creaive.com for more information.

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SOURCE Canaan Inc.

FAQ

What is Rosenblatt's price target for Canaan (CAN) stock?

Rosenblatt has set a price target of $3 for Canaan (CAN) stock over the next 12 months.

How much is Canaan (CAN) planning to expand its self-mining capacity by H1 2025?

Canaan (CAN) plans to increase its self-mining capacity from the current 0.65EH/s to 10EH/s by H1 2025, primarily in North America.

What was the impact of the April 2024 Bitcoin halving event on Canaan's (CAN) revenue?

Following the April 2024 Bitcoin halving event, demand for Canaan's A14-based rigs doubled revenue sequentially in Q2 2024.

How does Canaan's (CAN) valuation compare to its peer group?

Canaan (CAN) is trading at 0.6x EV/Sales, compared to 3.9x for its peer group, indicating significant undervaluation according to Rosenblatt.