BitMine Stock Forecast: Does a Sum-of-the-Parts Valuation Show Hidden Upside?

BitMine stock remained under pressure after Ethereum lost momentum during the latest crypto-market pullback. BMNR closed at $26.20 on Oct. 6, leaving the shares below their recent high near $28.76.

The company’s disclosed asset holdings still exceed its common-equity market capitalization on a gross basis. However, preferred-stock claims, expenses and changing Ethereum prices mean that gap should not be treated as a guaranteed liquidation profit.

Sum-of-Parts Calculation Shows BitMine Stock is Undervalued

Sum-of-parts is a valuation approach that looks at a company’s valuation by breaking its separate business units, valuing each one on its own, and adding the results together.

The first part of this approach is to check a company’s valuation in the form of market capitalization and enterprise value. In BitMine’s case, it has a market capitalization of over $16.1 billion and an enterprise value of $15.8 billion.

However, a closer look at its assets shows that they are more valuable than that. It holds 6,016,414 ETH coins, which are currently valued at over $15.7 billion. These coins are now about 4.9% of all tokens in circulation, meaning that it will soon hit its 5% target.

In addition to Ethereum, the company ended last week with $643 million in cash. It also has other stakes, including 214 Bitcoin, $180 million stake in Beast Industries, and $117 million in EightCo holdings.

Its Beast Industries stake assumes that it has not grown since the company invested in it last year. Chances are that the valuation has grown over time.

Taken together, all these assets are valued at over $17.2 billion, giving a $1.2 billion gap with the current market capitalization. As such, if one bought BitMine today, and decided to sell all of its assets, he would be left with a whopping $1.2 billion.

Of course, one has to account for the Series A Preferred Stock (BMNP), which the company used to raise cash for its Ethereum buying. This vehicle now requires over $30 million a year, which BitMine will need to pay.

BitMine is Seeking to Be a Free Cash Flow Machine

BMNR stock is seeking to become a free cash flow company. It now holds 6,016,414 ETH tokens, of which it has staked most of them. Over time, its goal is to stake the 6.105 million tokens and make an annual return of about 2.7%. Staking all these tokens will generate about 164,835 coins a year, whose value can be significant, especially if ETH jumps.

In a statement on Monday, Tom Lee said that its annualized staking revenue is expected to be about $363 million. Removing the $33 million of its preferred payments, this leaves the net income at $333 million. Also, removing the labor costs and taxes, leaves the rest of the funds as a profit, which it can use to repurchase its shares or pay a dividend. BitMine plans to repurchase over $4 billion in shares in the coming years.

BMNR Stock Price Technical Analysis

The daily chart shows that the BitMine stock has jumped in the past few months. It jumped from a low of $12.80 in June to a high of $28.76.

The stock has remained above the ascending trendline that links its lowest levels since June this year. It has also remained above the dynamic support of the 50-day Exponential Moving Average (EMA).

Therefore, the stock will likely have a strong bullish breakout, potentially to the key resistance level of $40. This view will be confirmed if it moves above the resistance level of $28.76.

This article is for informational purposes only and does not constitute financial or investment advice. Crypto asset values, staking yields, valuation discounts and technical levels may change as market conditions evolve.