Entering value territory for investors

Bitcoin (CRYPTOCURRENCY: BTC) is trading at all-time highs, consolidating and forming a bullish flag that should guide stocks like Bitcoin deposit NASDAQ: BTM higher. The combined effect of widening acceptance and the impending halving drives Bitcoin’s movement, and even more significant gains are in sight. Post-halving activity usually results in high triple-digit earnings that will boost margins for all Bitcoin companies regardless of their model.

Bitcoin miners are ready to make the most of it now, but players like Bitcoin Depot have long-term gains in sight. Its Bitcoin ATM network is rapidly growing globally, providing another leverage for results. Although activity is muted today, Bitcoin usage is increasing and more significant gains are yet to be achieved.

Experts predict that the Bitcoin landscape will be very different in ten years, after two more halvens and knowledge of the cryptocurrency will be ubiquitous. The belief is that Bitcoin, as a basis for digital assets, will become a normal store of value and could even reach $1 million per BTC.

Bitcoin Depot is aggressively expanding its kiosk network

Bitcoin Depot’s story this year is one of aggressive expansion. The company has signed numerous contracts in the past three months, setting the stage for significant expansion across North America and surrounding areas. The goal is to have 8,000 kiosks installed by the end of the year, and the company is on track. Recent news includes the purchase of an additional 900 Bitcoin ATMs, bringing the company’s total ownership to 24,222.

Fourth-quarter results and forecasts for the first quarter of 2024 are unfavorable for stock prices, but analysts remain bullish on the name. Report highlights include lackluster results and persistent GAAP losses, with the same forecast for the first quarter. However, gross margins are improving as more kiosks come online, and the improvement is likely to continue as 2024 progresses.

The results and guidance have led some analysts to lower their price targets, but the details suggest this stock is deeply undervalued. The few who lower their targets fall in line with the consensus, which implies a 155% upside, and even the lowest target recorded by Marketbeat assumes some upside is available. Northland Securities set the low target of $3.50 in December 2023, assuming about 75% upside, with shares trading around $2.00.

Does Bitcoin Depot have the capital to get to the finish line?

Bitcoin Depot appears sufficiently capitalized to reach the finish line. Fourth-quarter operations consumed cash, but not at an alarming rate. Fourth quarter cash burn was reported as $1.5 million, up from $0.5 million, but offset by full-year profitability and an outlook for improving profitability throughout the year. Even so, the company has enough cash to cover its consumption at the current quarterly pace for several years.

Institutional interest is still low, but there has been some noteworthy activity since the reverse merger/IPO. Institutions are buying these shares and own about 10% of the shares, with Vanguard leading the way. Vanguard has bought it more than once for its funds, but still holds less than 1%.

Bitcoin Depot Overextends and Sets Up for a Rebound

Bitcoin Depot’s price action has declined since the IPO and new lows are imminent. However, indicators diverge from the price action and suggest that the market is oversold and ready to rebound. The next visible catalyst is the May earnings report, and the company has lowered the bar. Bitcoin Depot may outperform its forecasts, but the results may not matter if Bitcoin’s price skyrockets and the company’s footprint grows. In this scenario, underperformance will soon be replaced with outperformance as demand and expanded kiosk access drives revenue, wider margins, and profits.

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