Bitcoin (BTCUSD) has come roaring back with a vengeance in 2024, with spot prices surging above $62,000 last week to touch their highest price since late 2021. This rally has been fueled by a combination of factors, including the launch of exchange-traded funds (ETFs) based on spot Bitcoin, along with anticipation surrounding the historically bullish “halving” event scheduled for this spring.

Blockchain and cryptocurrency-related stocks are on the rise, too - and in fact, many top names in the industry, including Marathon Digital(MARA) and Microstrategy (MSTR), now trade at or above Wall Street's mean price targets. However, small-cap Canaan Inc. (CAN) could be an exception to the rule, with analysts calling for significant upside potential in the year ahead. 

About Canaan Stock

Valued at $275 million by market cap, Canaan Inc. (CAN) manufactures and sells equipment used for Bitcoin mining. Based out of Beijing, CAN focuses on ASIC high-performance computing chip design, chip research and development, computing equipment production, and software services.

Despite Bitcoin's parabolic price action in recent weeks, CAN shares have lagged - currently trading below $2 per share, down 30% YTD. At the same time, the broader Chinese stock market has struggled amid a weak macroeconomic backdrop, while tech stocks have been in particular focus amid ongoing U.S. trade tensions. 

While the overhang of tense U.S.-China tech relations remains a considerable risk, Canaan has continued securing major purchase orders from key partners in the crypto mining space. These deals underscore the company's strengths in mining machine manufacturing, and position Canaan to benefit from further adoption of bitcoin and crypto.

To start 2024, Canaan announced follow-on purchase agreements with two leading crypto mining firms - Cipher Mining (CIFR) and Stronghold Digital (SDIG). The deals build on existing relationships, and involve the combined purchase of over 17,000 of Canaan's latest A1466 and A1346 Bitcoin mining rig models.

CAN Reports Mixed Earnings

In its Q4 earnings results, released on Feb. 27, Canaan reported a loss of $139 million, or $0.77 per share. On an adjusted basis, the per-share loss was $0.30 - slightly wider than what analysts were anticipating. On the other hand, revenue for the quarter arrived at $49.07 million, which edged past the consensus forecast.

Shares have pulled back 17% since the report. Analysts are targeting 4.57% revenue growth in fiscal 2024 to $221.12 million, valuing CAN at 1.66x forward sales. That's a considerable discount relative to industry peers like MARA, Bit Digital (BTBT), BitFarms (BITF), and Hive Digital (HIVE).

What Do Analysts Expect for CAN Stock?

Wall Street analysts remain confident about CAN's future growth trajectory, although the China-based crypto stock hasn't garnered a very wide following on Wall Street just yet. Both of the analysts in coverage call the stock a “Strong Buy.”

However, Benchmark reduced its CAN price target after earnings, and now has the Street-low price target of $2.50 - down from the former Street-high of $5.50. Nevertheless, the new mean price target of $2.75 implies expected upside of more than 100% from Friday's close.

The Bottom Line on CAN Stock

With Bitcoin regaining momentum above $60K and evidence of crypto adoption accelerating, analysts clearly see some upside potential for Canaan as it expands partnerships with key clients. That said, given the uncertainty around U.S.-listed China tech stocks, it's worth giving this penny stock a pass unless you have the stomach to tolerate the relatively higher risk profile, as well.