Why Cipher Mining Stock Just Jumped 16%

Cipher Mining (NASDAQ:CIFR) a Bitcoin mining company focused on building and operating large-scale data centers for Bitcoin mining and high-performance computing hosting, jumped almost 16% in Wednesday’s trading. The gains come after the company announced strong progress at its new mining facility called Black Pearl. The site’s hash rate, which is a measure of how fast computers can process bitcoin transactions, came in well ahead of the company’s estimates, with the number expected to increase further in Q3. This is significant, as a higher hash rate improves Cipher’s ability to mine more Bitcoin and could also boost operational efficiency and margins. Cipher also indicated that it mined 160 bitcoins in June, sold 58 bitcoins, and is now holding 1,063 bitcoins.

Despite the recent progress, Cipher stock does not look too attractive, based on its operating performance over the recent years as well as its current and historical financial condition.  That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

Image by Aaron Olson from Pixabay

Cipher Mining has posted mixed results although it’s worth noting that mining businesses, particularly in the crypto space, often exhibit volatile financials that do not always align with traditional valuation metrics. Revenues have remained largely flat, slipping slightly from $153 million to $152 million over the last 12 months. Profitability, however, has been deeply negative. The company posted an operating loss of $129 million over the last four quarters, translating to an operating margin of -84.5%, while net losses came in at $124 million, or a net margin of -81.2%. Despite these weak margins, the stock trades at a price-to-sales ratio of 11.6 significantly above the S&P 500’s 3.1.

CIFR stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes. During the inflation shock of 2022, CIFR stock fell 97.2% from a high of $14.52 on 16 September 2021 to $0.41 on 28 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500. The stock is yet to recover to its pre-Crisis high.

While you would do well to avoid CIFR stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics

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