Emily Barry
Bitcoin has lost more than half of its value this year. This will hurt some companies much more than others.
During the recent cryptocurrency boom, companies have turned their entire business into a lively theme, built meaningful cryptographic capabilities with traditional operations, or soaked their feet in water so they aren’t left behind. , Jumped into the trend quickly.
When the times were good, companies liked to talk about cryptocurrency involvement, but only a few. But with cryptocurrency prices declining, which companies are actually seeing significant contributions from cryptocurrency efforts, and could suffer some pain in a harsh climate? It is worth investigating.
Bitcoin has plunged 53% so far through trading on Friday afternoon, but the S & P 500 index has lost 18.1%, plunging 68% from its record closing in November 2021. 305% in 2020.
MarketWatch surveyed 13 companies exposed to cryptocurrencies in various ways. Below, we analyze how digital assets affect these businesses.
Some companies are all about crypto …
Company Ticker Crypto exposure Coinbase Global Inc. COIN Coinbase is all in on crypto, generating the bulk of its revenue from trading and the rest from other crypto-related activities like staking and custodial services. Marathon Digital Holdings Inc. MARA Once a patent company, Marathon now operates bitcoin mining rigs. In addition to generating its revenue from crypto mining, the company holds some of the bitcoin it mines as assets. Riot Blockchain Inc. RIOT Like Marathon, Riot pivoted to bitcoin mining in recent years. The bulk of its revenue is from bitcoin mining, though it also generates hosting and engineering revenue. The company holds bitcoin on its balance sheet.
Others are not very involved
Company Ticker Crypto exposure Advanced Micro Devices Inc. AMD AMD chips have been used for crypto mining, but the company's CEO said late last year said crypto was not a "meaningful driver" of the GPU business. Block Inc. SQ The fintech company lets its Cash App users buy bitcoin through the mobile wallet. Bitcoin accounts for about 3% of gross profit. Fidelity National Information Services Inc. FIS The merchant-acquiring company has said it served four of the top five crypto exchanges. A Baird analyst pegs crypto exposure at less than 5% of merchant-segment revenue. Mastercard Inc. MA Mastercard has card offerings for crypto wallets looking to help customers convert crypto into fiat currency for quick spending. Baird estimates crypto represents "well less than 1% of total revenue." MicroStrategy Inc. MSTR The software company held about 129,699 bitcoins as of late June but acquired them at an average price considerably higher than current levels. Nvidia Corp. NVDA Nvidia's dedicated crypto-mining chip brought in "nominal" revenue in the latest quarter compared with $155 million a year earlier. PayPal Holdings Inc. PYPL Like Block, PayPal lets users buy, sell, and hold cryptocurrency, but analysts see the company's crypto exposure as less than Block's. Robinhood Markets Inc. HOOD The brokerage company generated 18% of revenue from crypto-related activity in its last-reported quarter. Signature Bank SBNY As the "leading depository bank" for digital asset companies, Signature Bank had $29 billion in deposits from the digital-currency ecosystem at the end of the first quarter. Visa Inc. V Like Mastercard, Visa works on card offerings with crypto exchanges and has various crypto-related services. Baird estimates that "well less than 1% of total revenue" comes from crypto.
AMD and Nvidia
AMD (AMD) and Nvidia (NVDA) manufacture chips that can be used for crypto mining, but these companies do not clearly indicate how much revenue they will earn from such applications.
According to Nvidia, revenue from dedicated cryptocurrency mining chips was “nominal” in the quarter, compared to $ 155 million in the year-ago quarter. Nvidia’s “nominal” contribution disclosures are most recent, as total revenue of $ 155 million in the previous quarter was about 1.9% of total (larger) total revenue in the latest quarter. It suggests that it was a smaller part of the quarter’s total revenue.
“It’s difficult to quantify how much cryptocurrency mining has contributed to gaming demand with reasonable accuracy,” Nvidia Chief Financial Officer Colette Cress said in a recent earnings call. rice field. “The slower growth in Ethereum network hashrates may reflect lower mining activity on GPUs. It is expected that contributions will decline in the future.”
According to the transcript, AMD executives never mentioned cryptocurrencies in the company’s latest earnings announcement in May or in its presentation on Analyst Day in June. When asked at an investor meeting in December how crypto is impacting the market for AMD graphics processing units during times of tight supply, CEO Lisa Su said, “Numbers. It’s a very different market than the cryptography of a year ago. ” We do not consider cryptography to be the “meaningful impetus” for the business.
Nvidia declined to comment. AMD’s spokesperson said the company is in a quiet period and earnings are expected to be reported on July 26, with no comment beyond the previous statement above.
block
Block Inc. (SQ) has the largest cryptocurrency exposure of any traditional payment technology name to allow users to buy and sell Bitcoin through the Cash App mobile wallet. The topic of Bitcoin helped Brock gain momentum in the strong trading interests of early 2021, and CEO Jack Dorsey was a supporter of the crypto voice.
On paper, Block may appear to be heavily dependent on cryptographic activity. The company reported $ 10 billion in GAAP Bitcoin revenue last year, accounting for about 57% of total revenue. However, Bitcoin revenue figures can be misleading in the case of blocks, as the profit from spreads is minimal.
In general, block executives and analysts covering equity focus on gross profit figures rather than revenue across the company’s business line, and based on that, Bitcoin is the company’s gross profit last year. About 5%, or first quarter.
“They have more visibility issues than fundamental issues,” Mizuho analyst Dan Dreff told MarketWatch. “There are many good things about [Block] People are missing because of this Bitcoin center [narrative].. ”
Brock executives see Bitcoin as an important driver of cash applications. “Bitcoin’s monthly activities are far more than those who only use their mobile wallets for peer-to-peer remittances,” said Brian Glasadonia, cash app leader, on the company’s May Investor Day. It has brought a lot of influx into the ecosystem. ” You have the opportunity to monetize those inflows over and over, as you put the levers where the money isn’t really out of the ecosystem. ”
Bitcoin miner
Bitcoin mining companies such as Riot Blockchain Inc. (RIOT) and Marathon Digital Holdings (MARA) are “cheap, preferably finding and securing renewable energy and buying lots of the best Bitcoin mining rigs available. Are completely exposed to cryptocurrencies because they include, and keep them cool, “says DA Davidson analyst Chris Blendler.
Don’t miss: Bitcoin miners are suffering from falling crypto prices, rising energy costs, and increasing mining difficulty.
Marathon Digital categorizes all revenues as mining-related, and Riot categorizes a small portion from hosting and engineering. Other mining stocks include Core Scientific Inc. (CORZ) and CleanSpark Inc. (CLSK).
Some Bitcoin mining companies started that way, while others pivoted as cryptocurrencies became popular. Riots were once a small veterinary medical company, and marathons were once a patent business.
When Bitcoin’s price soared last fall, businesses could have a gross profit of over 90%, but now the total market has dropped to 60%. “They are still very profitable, but the market is worried that Bitcoin could go down,” he told MarketWatch.
In his view, the biggest problem with mining names is that they are very capital intensive. This may mean that companies may need to continue spending to maintain market share, but they want to keep the Bitcoin they have mined so that investors are directly exposed to the price of Bitcoin through stocks. For some reason, Blendler continued. However, the stock market has turned negative for Bitcoin miners, the lending market has deteriorated, and he says that “the best miners with the best balance sheet” are in the best position to survive. Said.
Coinbase
Coinbase Global Inc. (COIN) generates almost 90% of its revenue from transactions and the rest from various subscription and service initiatives, so it’s all about cryptocurrencies. The company generated $ 1.2 billion in transaction revenue in the first quarter, down 56% from the fourth quarter. Subscription and service revenue, including blockchain compensation and custody fees, fell by a total of 20%.
See: Coinbase sees crypto trading down
“It’s very correlated and that’s something most people don’t understand,” said Mizuho’s Dolev. “People thought this was something they could do outside of cryptography, but in the end it would be the same.”
FIS, Mastercard, Visa
According to analysts, older payment companies Visa Inc. (V), Mastercard Inc. (MA) and Fidelity National Information Services Inc. (FIS) are more exposed to the world of cryptocurrencies than companies like Block. Is even less.
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07-09-22 1035ET
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