Benchmark Initiates Coverage on Canaan (CAN) with a "Buy" Rating and $3 Price Target

Benchmark has initiated coverage of Nasdaq-listed Canaan (NASDAQ:CAN) with a “buy” rating and a $3 price target, adding that the micro-cap bitcoin (BTC-USD) miner is a long-term value play that is trading at a steep discount.

The company’s vertically integrated business model, combining bitcoin mining hardware production with its own proprietary mining operations, is a key differentiator that will benefit from rising bitcoin prices, the analyst Mark Palmer noted.

“CAN’s vertically integrated approach differentiates it within the bitcoin mining space while positioning it to capitalize on both chip/rig sales and proprietary mining revenues,” Palmer wrote in a note to clients on Monday. “We believe the company’s ADRs are very inexpensive … and expect their price to appreciate as it executes on its strategy, with a potential tailwind coming from the rising price of bitcoin.”

Canaan, which launched the first ASIC-powered bitcoin mining rigs in 2013 under its Avalon brand, recently started the mass delivery of its A15 series machines. The company sold a record 9.1 million tera hashes per second (TH/s) in the fourth quarter, a 66% increase year-over-year, and its equipment revenue reached a two-year high of $73 million.

Canaan has also completed the tape-out of its next-generation A16 series, which is expected to deliver up to 300 TH/s in its standard air-cooled configuration.

The company is also rapidly expanding its self-mining operations. While only 16.3% of 2024 revenue is expected to come from self-mining, Canaan aims to boost its computing power to 10 exa hashes per second (EH/s) in North America and 15 EH/s globally by mid-2025, up from 3.02 and 8.11 EH/s, respectively, as of March 31.

Canaan is expanding into the consumer market with the Avalon Q, a professional-grade miner designed for residential use. The device will deliver up to 90 TH/s and feature adjustable power consumption and low-noise operation, helping the company diversify its revenue streams.

Canaan’s bitcoin holdings also provide an additional valuation floor. As of March 31, the company held 1,408 BTC, valued at approximately $133 million, which is nearly 70% of its market capitalization.

With shares currently changing hands at 0.2 times projected 2025 revenue, the stock appears to be meaningfully undervalued relative to its peers, Palmer added.

Canaan’s stock trades around $0.60 per share and has a market cap of $245 million. The stock is down more than 30% over the past year.