When Bitcoin is running higher, it's easy for investors to get caught up in the excitement and start buying anything remotely tied to crypto. But history has shown that not every crypto stock is created equal. Some own the picks and shovels. Others are simply trying to survive the next mining cycle. Today, a ton of miners are struggling to survive the next cycle, including today’s Bear of the Day.
I’m talking about Zacks Rank #5 (Strong Sell) BitFuFu (FUFU). On the surface, the company checks a lot of boxes. It provides Bitcoin mining and cloud mining services, has relationships with major industry players, and benefits when Bitcoin prices move higher. The problem is that crypto mining remains one of the most brutally competitive businesses on the planet.
Every time Bitcoin rallies, miners rush to add capacity. New machines come online, network difficulty rises, and the economics get tougher. What looks like a windfall today can quickly become a margin squeeze tomorrow. The halving event only amplifies that challenge by cutting mining rewards in half while operating costs continue to rise.
BitFuFu Inc. price-consensus-chart | BitFuFu Inc. Quote
Investors also need to remember that BitFuFu isn't just a bet on Bitcoin. It's a leveraged bet on Bitcoin mining economics. If Bitcoin rises 20%, that doesn't automatically mean profits rise 20%. Factors such as electricity costs, machine efficiency, hosting expenses, and network hash rate all play major roles in determining profitability.
Estimates have been moving in the wrong direction when you look out towards next year while this year’s numbers have bounced all over the place. Our Zacks Consensus Estimate for the current year has gone from 12 cents to 16 to 7 to 14 over the last ninety days. The current year started as a 27-cent profit, then moved to a 6-cent loss before ticking back up to a 7-cent gain. That means that next year earnings are forecast to shrink 52%.
BitFuFu is in the Financial – Miscellaneous Services industry that ranks in the Top 43% of our Zacks Industry Rank. There are other names within that industry that are in the good graces of our Zacks Rank. These include Zacks Rank #1 (Strong Buy) stocks Alerus Financial (ALRS) and StoneX Group (SNEX).
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