Bitcoin Depot Falls Into Value Territory With Expansion Underway

Key Points

• Bitcoin prices are near record highs and may double or triple soon after the halvening.
• Bitcoin Depot is widening its footprint and is ready to take advantage of mainstream Bitcoin usage. 
• Analysts have lowered their targets but still see significant upside for the stock. 

Bitcoin (CRYPTOCURRENCY: BTC) is trading at all-time highs, consolidating, and forming a bullish flag that should lead stocks like Bitcoin Depot NASDAQ: BTM higher. The compounded effect of widening acceptance and the upcoming halvening drives the move in Bitcoin, and even more significant gains are ahead. Post-halving activity usually results in high triple-digit gains that will drive margins for all Bitcoin businesses regardless of their model. 

Bitcoin miners stand to make the most now, but players like Bitcoin Depot have long-term gains in sight. Its network of Bitcoin ATMs is rapidly growing globally, providing another lever for results. While activity is muted today, Bitcoin usage is rising, and the most significant gains are still ahead. 

Experts forecast the Bitcoin landscape will be much different in ten years, after two more halvenings and knowledge of cryptocurrency is ubiquitous. The belief is that Bitcoin, as the foundation layer for digital assets, will become a mainstream store of value and may even reach $1 million per BTC. 

Bitcoin Depot Is Aggressively Expanding Its Network of Kiosks

The story with Bitcoin Depot this year is aggressive expansion. The company signed multiple contracts over the past three months, laying the groundwork for significant expansion throughout North America and surrounding areas. The aim is to have 8,000 installed kiosks by the end of the year, and the company is well on track. Recent news includes the purchase of 900 more Bitcoin ATMs, bringing the company-owned total to 24,222. 

The FQ4 results and guidance for Q1 2024 are unfavorable for share prices, but analysts remain bullish on the name. Highlights from the report include sluggish top-line results and persistent GAAP losses, with the same expected in Q1. However, gross margins are improving with additional kiosks coming online, and improvement is likely to continue as 2024 progresses. 

Results and guidance led some analysts to lower their price targets, but the details suggest this stock is deeply undervalued. The few to lower their targets align with consensus, which implies a 155% upside, and even the lowest target recorded by Marketbeat assumes some upside is available. Northland Securities set the low target of $3.50 in December 2023, assuming about 75% of the upside, with shares trading near $2.00. 

Does Bitcoin Depot Have The Capital To See Itself To The Finish?

Bitcoin Depot appears sufficiently capitalized to see itself through to the finish line. The Q4 operations resulted in a cash burn, but not at an alarming rate. The Q4 cash burn was reported as $1.5 million, up from $0.5 million, but offset by full-year profitability and an outlook for improving profitability as the year progresses. Even so, the company has enough cash to cover its burn at the current quarterly pace for several years. 

Institutional interest is still low, but noteworthy activity has existed since the reverse merger/IPO. The institutions are buying this stock and own about 10% of the shares, with Vanguard in the lead. Vanguard has bought it more than once for its funds but still holds less than 1%. 

Bitcoin Depot Overextends And Readies For a Rebound

Bitcoin Depot’s price action has decreased since the IPO, and new lows are imminent. However, the indicators diverge from the price action and suggest the market is oversold and ready to rebound. The next visible catalyst is the May earnings report, and the company set the bar low. Bitcoin Depot may outperform its guidance, but results may not matter if the price of Bitcoin is skyrocketing and the company’s footprint grows. Underperformance will soon be swapped for outperformance in that scenario as demand and broadening access to kiosks drive revenue, wider margins, and profits.