Bitcoin Mining Risks And Green Energy Projects Will Shape A Cautious Yet Potentially Rewarding Future

Catalysts

About Cango

Cango operates global Bitcoin mining operations and is building a distributed, green-energy powered AI compute network, alongside an asset-light used car export platform.

What are the underlying business or industry changes driving this perspective?

• Although Cango has reached a deployed hashrate of 50 exahash with around 90% uptime, reliance on high energy intensity Bitcoin mining exposes revenue and earnings to sharp Bitcoin price swings and potential changes in mining economics. These factors could pressure net margins if pricing or difficulty move against current cost levels.
• Although the migration to newer T21 and S21 series miners and the Georgia facility is intended to lower per unit operating costs, any increase in power prices or regulatory shifts around energy usage could erode the expected efficiency gains. This could compress operating income and adjusted EBITDA.
• Although Cango is planning a global distributed AI compute network to serve small and midsized enterprises, the company still needs to prove demand, pricing power and contract visibility in this newer business line. These uncertainties could create earnings volatility and require further capital before contributing meaningfully to revenue and margins.
• Although clean energy projects in Oman and Indonesia are expected to support future AI and compute infrastructure, delays in commissioning, construction risks or policy changes in these regions could limit access to low cost green power. This could affect long term cost of revenues and return on invested capital.
• Although the asset-light approach and long term debt with 7% to 8% borrowing costs aim to support growth, a heavy reliance on related party long term debt and Bitcoin collateral receivables could constrain financial flexibility. Interest expense and balance sheet risk could weigh on future net income if funding terms tighten.

Assumptions

This narrative explores a more pessimistic perspective on Cango compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Cango's revenue will grow by 8.6% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -20.6% today to 93.1% in 3 years time.
• The bearish analysts expect earnings to reach $740.4 million (and earnings per share of $1.9) by about January 2029, up from $-128.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 17.1x on those 2029 earnings, up from -4.2x today. This future PE is lower than the current PE for the US Specialty Retail industry at 20.7x.
• The bearish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.04%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Cango is heavily tied to Bitcoin mining, with US$220.9 million of its third quarter 2025 revenue coming from this activity and an average all in mining cost of US$99,383 per coin. Prolonged Bitcoin price weakness or less favorable mining economics could pressure revenue and squeeze net margins and earnings if prices sit closer to or below the cost base.
• The business model relies on an asset light global footprint with 50 exahash of deployed hashrate and roughly 90% uptime. External factors such as weather, grid curtailment and power market changes in the Americas, the Middle East and Africa could reduce utilization, raise power costs and weaken revenue, operating income and adjusted EBITDA over time.
• The balance sheet carries US$660 million in receivables for Bitcoin collateral and US$405.1 million of long term related party debt with borrowing costs in the 7% to 8% range. Weaker Bitcoin prices, tighter financing conditions or issues collecting on collateral could strain liquidity, increase interest burden and weigh on net income.
• The planned green energy projects in Oman and Indonesia and the distributed AI compute network are still early and expected to be commissioned in one or two years. Delays, cost overruns, regulatory changes or weaker than expected demand from small and midsized enterprises could limit diversification away from Bitcoin mining and reduce the contribution to future revenue growth and margin stability.
• Cango follows a mine and hold strategy for Bitcoin reserves and uses them as a liquidity buffer. A sharp and sustained downturn in Bitcoin prices or tighter capital markets could force less favorable Bitcoin sales or financing, which would directly impact cash flow, reduce balance sheet flexibility and pressure earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Cango is $3.0, which represents up to two standard deviations below the consensus price target of $3.5. This valuation is based on what can be assumed as the expectations of Cango's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.0, and the most bearish reporting a price target of just $3.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be $795.2 million, earnings will come to $740.4 million, and it would be trading on a PE ratio of 17.1x, assuming you use a discount rate of 11.0%.
  
• Given the current share price of $1.57, the analyst price target of $3.0 is 47.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.