On Tuesday, B.Riley adjusted its outlook on Bitcoin Depot (NASDAQ: BTM) shares, lowering the price target from $6.00 to $4.00, but maintained a Buy rating on the stock.
This revision follows the company's fourth-quarter earnings report released before the market opened on Monday, which showed a slight year-over-year decrease in revenue and a more significant drop in adjusted EBITDA.
Bitcoin Depot's revenue for the fourth quarter of 2023 was reported at $148.4 million, a 1% decline from the previous year. The adjusted EBITDA for the same period fell by 21% year-over-year to $8.9 million.
These figures fell short of the analyst's expectations, which predicted revenues to be around $159.6 million. Despite the lower revenue, Bitcoin Depot managed to surpass the forecasted adjusted EBITDA due to effective expense management.
The company provided guidance for the first quarter of 2024 that was significantly below the analyst's initial projections. The lowered expectations are attributed to new regulations in California that limit cryptocurrency transaction sizes to $1,000 per day.
So far, the impact of these regulations on first-quarter revenue is estimated to be between $13 million and $15 million, potentially reducing annual sales by nearly $60 million. Bitcoin Depot does not anticipate a regulatory or legal resolution to increase the transaction limit before the end of 2024.
Despite the regulatory hurdles, Bitcoin Depot is planning to expand its network of kiosks. By the end of 2024, the company aims to increase its kiosk count to nearly 8,000, up from 6,339 at the end of the previous year. However, the costs associated with deploying new kiosks, which range from $900 to $1,700 each, are recognized immediately, while it takes several quarters for the kiosks to reach full productivity.
The revised price target of $4 reflects the analyst's updated revenue and EBITDA forecasts for 2024, taking into account the challenges posed by the new regulations and the associated impact on Bitcoin Depot's financial performance.
InvestingPro Insights
As Bitcoin Depot navigates the complexities of regulatory changes and expansion strategies, real-time data from InvestingPro provides a nuanced view of the company's financial health. Currently, Bitcoin Depot has a market capitalization of $127.32 million, reflecting the market's adjusted expectations post-earnings report. Despite the lack of a traditional P/E ratio due to negative earnings, the adjusted P/E ratio for the last twelve months as of Q4 2023 stands at -11.05, indicating that investors are pricing in the company’s potential for future profitability.
The company's revenue growth has been modest, with a 6.51% increase in the last twelve months as of Q4 2023, though the quarterly comparison shows a slight decline of 0.84%. This aligns with the earnings report's indication of a revenue dip. Moreover, while the gross profit margin is relatively weak at 14.56%, it's a critical metric that investors monitor to assess the company's efficiency in managing its cost of goods sold.
Among the InvestingPro Tips, two notable insights stand out. Firstly, Bitcoin Depot is trading at a low revenue valuation multiple, which might appeal to value investors looking for entry points into the cryptocurrency services sector. Secondly, the company does not pay a dividend, which is a relevant consideration for income-focused investors. It's worth noting that there are additional tips available on InvestingPro, which could further guide investment decisions. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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