H.C. Wainwright has initiated coverage of BTCS Inc. (NASDAQ: BTCS) with a Buy rating and price target of $6.00.
The firm says the price target reflects its bullish view of BTCS, noting that this is “one of the few crypto companies exclusively devoted to leveraging altcoin returns.”
As part of its diversified portfolio, BTCS has top altcoins Ethereum (ETH), Cardano (ADA), Solana (SOL), and Algorand (ALGO).In total, there are 11 altcoins.
H.C Wainwright’s Kevin Dede says BTCS’ strategic ambition in the staking yields as a service industry is highlighted in offerings for institutional and retail investors. And just how big the sector is or is set to be was signaled by Kraken’s +$1.3 billion acquisition of staking platform Stake.
BTCS’s digital assets holdings were at $36.5 million in the fourth quarter of 2021, marking a 21% jump from $30.2 million in the third quarter ending September.
BTCS’s staking model
Before taking a bullish view of BTCS’s investment, Wainwright spent “the better part of one year” getting to familiarise with the company’s staking model. Dede wrote:
We heavily weighted the business model objective compounded by management’s experience-gained finesse.
Interested investors might want to note that the blockchain company runs validator nodes for six coins and has five others that go into staking. While BTCS earns returns on the validator nodes, it pays a yield to those that “stake” their coins. The company makes money on the interest rate margin.
Meanwhile, investors can still benefit without having to get any of the altcoins. By holding the BTCS stock, investors have indirect exposure to blockchain and crypto.
Growth in the crypto sector offers BTCS an opportunity for further expansion. For instance, integrating Algorand (ALGO) staking has BTCS participating in the network of a platform currently used by more than 500 organisations.
Dede notes that apart from use cases such as NFTs, DeFi, gaming, robotics, the metaverse and DAOs, BTCS’s business could benefit from the growing integration of crypto and blockchain in logistics and decentralised record keeping.
Expensive, but interesting enough
According to Wainwright, BTCS shares are “expensive” and not for the “faint-hearted” based on price-to-sales estimates for 2022.
However, the stock is “interesting enough” to have attracted the analyst’s attention as well as triggered all the research that went into its report.
Overall, several data points suggest the stock’s price will likely be higher in the next 12 months. Using fiscal 2023 sales estimates of $3.3 million and where the business is today, Wainwright gives BTCS a $6.00 price target.
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