LM Funding America, Inc (NASDAQ: LMFA) stock is in rally mode, higher by more than 12% since Monday. While indeed impressive, the better news is that LMFA's wholly-owned U.S. Digital Hosting and Mining Co., LLC. subsidiary is positioning to add exponentially to those gains.
Even better, they are exposing a near-term proposition. And it comes after LMFA announced entering the digital mining space, purchasing 5000 state-of-the-art mining machines that can lead to LMFA generating and owning Bitcoin at a roughly 95% discount from current prices. That discount, by the way, is considering this morning's price of $59,300. If Bitcoin moves higher, which is expected, the cost of mining and ownership for LMFA gets even lower. Thus, with analysts forecasting BTC prices to reach upwards of $100,000 by the end of this year, taking advantage of an under-the-radar opportunity sooner than later may be a timely consideration. LMFA is that opportunity.
Investors also get the comfort of knowing that LMFA is doing exceptionally well already. Its new mining interests only add to the value proposition. Since September, LMFA stock has increased by 42% after posting $15.5 million in net income from its "buying problems" business. That translated to EPS of $2.96 per basic and $2.95 per diluted share in the first half of the year. The point- considering LMFA as only a mining play is shortsighted.
The better way to evaluate LMFA is to consider a potentially massive, low-cost new revenue stream that can add exponential value. It's going to happen. Moreover, investors shouldn't underestimate LMFA's ambition as a digital asset miner. They are charging the broadest part of the sector, not finding a niche.
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5000 Antminers Going To Work
Moreover, this is a near-term play, with new revenues expected to hit the books as early as the end of Q4. And most definitely in Q1 of 2022. Those new revenues will result from LMFA spending more than $31 million to purchase the best digital asset mining machines available, the S19J Pro Antminer Machines. All tolled, LMFA expects to put its 5000 Antminers to work by the end of Q2. Still, the value from putting 1000, 2000, and 3000 machines to work will add considerable value along the way. Hence, milestones can become catalysts. And deservedly so.
Consider this: Bitcoin is hovering around the $59,300 level and will only cost LMFA about $5,000 to generate a single Bitcoin. No need to point out that's an excellent return. However, while an impressive return for a single coin, consider the impact to revenues and their contribution toward the bottom line after 5000 Antminers are put to work. LMFA has helped define that outcome.
They anticipate mining at least 1200 bitcoins per year, resulting in turning "digital gold" into millions of U.S. dollars. Here's the better part of the equation. Since it will cost only about $6 million to mine 1200 coins at current prices, LMFA can reap roughly $65 million after the cost of mining. Keep in mind, too, that $6 million is an all-in cost on the production side and won't be straddled by labor shortages or holiday time off. These machines work 24/7/365, and other than a tune-up and regular maintenance, they don't ask for benefits.
There's more to like. While inflation fears send the markets on a roller coaster ride, it's actually a bullish case for holders of BTC (digital gold). And headlines indicate inflation is here, and worse, expected to be rampant through 2022. It's a reason why the largest financial institutions are calling for Bitcoin to reach upwards of $130,000 as early as Q1 of 2022. Some expect a break above $100,000 this month.
If so, instead of LMFA holding about $71 million of Bitcoin at current prices, they may be banking more than $156 million. Incidentally, the cost of mining remains the same. Thus, the best way to consider LMFA into the new year is as a "digital cash cow. Hence, investing before its Antminers get put to work may be a timely consideration to take advantage of an appreciable valuation disconnect.
LMFA Is In-Play
Investors apparently are doing just that. And with LMFA maneuvering to mint BTC sooner than later, they may be tapping into a considerable opportunity. Even better, LMFA is only using state-of-the-art environmentally friendly "miners" that aren't short on green power. Thus, they are checking off another critical box.
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. In dollar terms at current value, it's about $68 million.
Better still, as noted, milestones reached along the way will likely become catalysts for share price appreciation. In addition, investors can expect that every Antminer put to work is immediately accretive to revenues. Moreover, with BTC and other digital assets in rally mode, the downside risk looks to be substantially mitigated in the near and long term. Normal market fluctuations still apply. But, long term, few, if any, market analysts expect a deep and sustained correction in the leading tokens.
Notably, LMFA is also in line with "green-focused" best practices. That matters.
Mining Digital Gold With Best-In-Class Technology
For months, sector headlines have pointed to the drain on resources relating to digital mining. The loudest discussion is about the need for miners to shift from high-carbon energy consumption to greener technology. LMFA is paying attention. Even better, they are setting the trend.
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. And that's the immediate plan.
Keep in mind, too, the sector is booming. Riot Blockchain (NASDAQ: RIOT) and Sphere 3D (NASDAQ: ANY) have had 900% and 835% runs, respectively. And while legacy issues took back a large part of their gains, LMFA, which is positioned to become a significant mining player, could catch a substantial part of their prior tailwind. Not only can LMFA benefit from the multiple precedents set by peer companies, but they are also better positioned to hold gains.
Remember, LMFA has a clean capital structure, strong balance sheet, and robust EPS performance. Thus, LMFA may be a better long-term consideration on a comparison basis to peers. Neither RIOT nor ANY can fall back on more than $2.96 per share earnings. LMFA can.
Here's the best part of the investment proposition. Assuming that LMFA delivers only the 1200 Bitcoin expected and prices hold at $59,300, 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.
LMFA May Not Return 57,000%, But 800% In In-Play
Hence, taking advantage of this under-the-radar opportunity is a fashionable call. Moreover, it taps into LMFA's putting to work 5000 state-of-the-art Antminers expected to generate an exponential increase in Q1 and Q2 revenues. Moreover, don't expect the competitive landscape to broaden. Between LMFA and its known peers, pretty much all the Antmiers have been spoken for. Thus, the barriers to entry are higher than ever.
Can LMFA match BTC's more than 57,000% return since trading at $100? Not likely. But, with revenues expected to jump by over $70 million combined with an already impressive EPS, accruing 400% - 800% increases can be justified. Better still, with wheels in motion and equipment at work, that target increase is already in the crosshairs.
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