Canaan falls as 'challenging market conditions' hit Q2 guidance

Singapore-based bitcoin mining equipment products company Canaan fell ~20% on Friday afternoon after having issued Q2 guidance below Wall Street consensus, citing challenging market conditions as a reason. The company said it expects Q2 revenues to be ~$72M, considering "the challenging market conditions across the industry". The consensus revenue estimate is $87.20M (-64.19% Y/Y). "We must also see that the current economic environment is not optimistic. The cloud of uncertainty still rooms over us and the price of bitcoin may still continue to fluctuate," CEO Nangeng Zhang said during the company's Q1 earnings call. "At least, in the United States, the financing ability and the processing power of minors in large miners farms have not yet recovered. Coupled with current situation where the industry inventory has not yet been completed or the decision has not yet been completed, both sales prices and the gross profit will continue to be concentrated," Zhang said. "We are extremely cautious about expectations for the second quarter of 2023," the CEO added. The company reported Q1 GAAP EPADS of -$0.51, and the revenue of $55.23M (-72.6% Y/Y) misses by $12.5M. CAN's main business focuses on the design and development of ASIC chips for bitcoin mining machines, and the global bitcoin mining machine market size will grow at a CAGR of 12.6% from 2022 to 2031, Seeking Alpha analyst Fade The Market said in a recent report. The analyst gives the stock a Buy rating. Canaan has been under pressure since March 2021, when its share price started to collapse. During this time of low bitcoin prices, the company is focusing on cutting costs, stabilizing cash flows and investing in R&D for the purpose of developing new products. The performance of the company will continue to be affected by Federal Reserve policies, which have a negative impact on high-growth tech stocks, according to SA analyst Gary Bourgeault. Bourgeault gives CAN a Hold rating.