/zigman2/quotes/201074594/composite LMFA +13.79%
Dec 03, 2021 (AB Digital via COMTEX) -- Missed the meteoric rise in Bitcoin prices? Well, a NASDAQ-listed company is providing investors a second chance to invest in Bitcoin at rock bottom prices. But not through owning the actual token. The opportunity is through LM Funding America, Inc /zigman2/quotes/201074594/composite LMFA +13.79% stock and its wholly-owned U.S. Digital Hosting and Mining Co., LLC.
What's in play? A lot. LMFA recently announced entering into the digital mining space, purchasing 5000 state-of-the-art mining machines that can lead to LMFA generating and owning Bitcoin at a 95% discount from current prices. That discount is considering this morning's price of $57,156. If Bitcoin goes higher, the cost of ownership gets even lower. Hence, with analysts forecasting a significant surge in BTC prices, taking advantage of the opportunity sooner than later may be a timely consideration.
Here's the better news. LMFA isn't a one-interest company. And its operating performance is impressive. Since September, LMFA stock has increased by 30% following its posting net income from its "buying problems" business of $15.5 million or $2.96 per basic and $2.95 per diluted share in the first half of the year. Thus, while its new subsidiary interests can add exponential value, consider the LMFA investment proposition beyond its rising position as a significant digital mining company.
Putting Antminers To Work
Still, don't undervalue that interest, either. Its recently announced digital asset mining initiative is expected to drive revenues exponentially higher in the coming quarter. In fact, LMFA just ponied up more than $31 million to purchase the best Bitcoin mining machines available, the S19J Pro Antminer Machines. That brings its total ownership to 5000 miners. For LMFA and its investors, that puts considerable appreciation to market cap and share price on the table. Here's why.
Bitcoin is hovering around the $57,000 level and only costs LMFA about $5,000 to generate a single Bitcoin. Indeed, that's an excellent return. However, when 5000 Antminers are put to work, LMFA and its investors aren't expecting a single coin. LMFA, in fact, anticipates to mine at least 1200 bitcoins per year, resulting in turning "digital gold" into millions of U.S. dollars. Better yet, the roughly $6 million in cost necessary to mine 1200 coins at current prices would create more than $68 million for LMFA. Keep in mind, too, that $6 million is an all-in cost on the production side. Moreover, LMFA won't be straddled by labor shortages. These machines work 24/7/365, and other than a tune-up and regular maintenance, they don't get benefits.
Here's another consideration. While inflation fears send the markets on a roller coaster ride, it's a bullish case for holders of BTC (digital gold). And make no mistake, inflation is here. It's also a reason why the largest financial institutions are calling for Bitcoin to reach upwards of $130,000 as early as Q1 of 2022. If so, instead of LMFA holding about $68 million of Bitcoin, they may be banking about $156 million. By the way, the cost of goods remains the same. Thus, LMFA can be more than a "digital cash cow"; they can become a printing press of real dollars when they sell holdings.
This Company Is In-Play
Moreover, LMFA is maneuvering to make those transactions happen sooner than later. Even better, LMFA uses state-of-the-art environmentally friendly "miners" that aren't short on power.
Specifically, its Bitmain S19J Pro Antminer Machines are high efficiency, high hash rate machine mining SHA-256 algorithm that generates a maximum hash rate of 100 TH/s and has a power consumption of 3,000 KW/h. It's technical language, but here's what investors should focus on- LMFA expects to have all 5000 machines delivered and on-site generating Bitcoin by the second quarter of next year. And as noted, with approximately 504 petahash, investors can expect LMFA to generate about 100 Bitcoin per month based on current difficulty rates.
Keep in mind, too, milestones reached along the way will likely become catalysts for share price appreciation. Thus, launching 2000, 3000, 4000, and then 5000 Antminers each should drive share prices higher. Moreover, gains would be well deserved with downside risk mitigated by an expected strengthening BTC price. Best of all, LMFA is mining the right way, in line with "green-focused" best practices. That matters.
Mining Digital Gold With Green Technology
For months, digital currency activists have been raising awareness about the need to shift from high-carbon energy consumption needed to mine Bitcoin. LMFA is embracing the challenge. Better yet, LMFA aligns actions with ambitions.
LMFA announced that it has contracted with Miami-based Bit5ive subsidiary Uptime Armory LLC to manufacture 18 Pod5ive specialty containers and with Uptime Hosting LLC to house LMFA's mining machines. The 1-megawatt POD5ive idea was born as a turnkey mining solution offering greater density with a smaller footprint and lower cost factor. Even better, its design is more than an effective crypto mining solution; it requires minimal setup and seamless installation. Hence, LMFA can get up and running almost immediately after machines are delivered. Better still, they can create shareholder value. And that's the immediate plan.
Keep in mind, too, the sector is hot. Riot Blockchain /zigman2/quotes/209538617/composite RIOT +2.89% and Sphere 3D /zigman2/quotes/208465717/composite ANY +3.88% have had 900% and 835% runs, respectively. And while legacy issues took back a good portion of their gains, LMFA, which is positioned to become a significant mining player, could catch a substantial part of their tailwind. Indeed, the precedent set by peer companies suggests they can do very well. Moreover, considering its capital structure, balance sheet, and EPS performance, LMFA looks exceptionally better-positioned to hold gains.
Gains could be substantial. Assuming that LMFA delivers only the 1200 Bitcoin expected and prices of Bitcoin hold at $57,000, a $25 share price is justified using similar peer revenue multiples. However, if Bitcoin moves higher in line with forecasts, upwards of $50 is in play. Indeed, having less than 13 million shares O/S and only about 9.5 million in the float has advantages. Better yet, the total package at LMFA offers much more than an impressive capital structure. They have excellent management, cash, the right equipment and target a market where investor appetite is insatiable.
Missed The 57,000% Run, Don't Look Past 400%
Thus, the LMFA bullish thesis is strong. And with 5000 state-of-the-art Antminers expected to generate an exponential increase to revenues starting as early as next quarter, it may get stronger. Moreover, since LMFA has purchased the machines, it's a scenario actively playing out. That makes the sum of its parts more than an attractive investment proposition; it makes it a compelling one.
Can LMFA match BTC's more than 57,000% return since trading at $100? Maybe not. But, based on expected revenues, capital structure, and peer multiples, accruing 400% - 800% increases in value through LMFA stock is certainly a realistic expectation. And at the end of the day, few will complain about that.
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