Global Bitcoin Mining Expansion Will Unlock Digital Asset Value

Key Takeaways

• Strategic diversification in global Bitcoin mining and used car exports positions Cango for upside as digital asset and online auto markets expand.
  
• Strong liquidity, cost-efficient energy partnerships, and legacy platform risk controls support operational resilience and future growth opportunities.
  
• Exclusive reliance on Bitcoin mining heightens exposure to crypto volatility, operational inefficiencies, and cost pressures, undermining both profitability and business model resilience.

Catalysts

Operates an automotive transaction service platform that connects dealers, original equipment manufacturers, car buyers, and other industry participants in the People’s Republic of China, British Virgin Islands, and internationally.

• The company's asset-light, global diversification in Bitcoin mining-with operations in North America, South America, Middle East, and Africa and a rapid scaling of hash rate capacity from 32 to 50 exahashes-positions Cango to benefit disproportionately as institutional and retail adoption of digital assets continues worldwide, setting up potential upside in revenue and gross profit as the industry expands.
  
• Significant cash reserves (~$347 million as of quarter-end), ample liquidity, and access to sizable credit lines empower Cango to pursue additional M&A, infrastructure expansion, or efficiency improvements, which can drive higher future earnings or support share buybacks to increase EPS.
  
• Cango's focus on securing long-term, low-cost, and clean energy partnerships (targeting the Middle East, Australia, and renewables) aims to enhance mining cost efficiency and reduce volatility in margins, leading to improved net margins if power costs are successfully controlled.
  
• The company's ongoing improvement in credit risk controls within its legacy auto platform-evidenced by falling credit risk exposure and improved loan quality-limits downside risk, preserves cash flow, and provides optionality if China's vehicle ownership and digital auto transaction markets accelerate again over the long term, potentially lifting both earnings and valuation multiples.
  
• The expansion and enhancement of the AutoCango used car export marketplace, which leverages digital platforms to connect Chinese supply with overseas demand, is aligned with the accelerating global shift toward online auto marketplaces and could drive the return of diversified, higher-margin, tech-enabled revenue streams beyond Bitcoin mining.

Cango Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Cango's revenue will grow by 98.3% annually over the next 3 years.
• Analysts are not forecasting that Cango will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Cango's profit margin will increase from 0.1% to the average US Specialty Retail industry of 4.5% in 3 years.
• If Cango's profit margin were to converge on the industry average, you could expect earnings to reach CN¥627.8 million (and earnings per share of CN¥3.59) by about August 2028, up from CN¥2.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.9x on those 2028 earnings, down from 2557.6x today. This future PE is greater than the current PE for the US Specialty Retail industry at 18.5x.
• Analysts expect the number of shares outstanding to decline by 0.25% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.16%, as per the Simply Wall St company report.

Cango Future Earnings Per Share Growth

Risks

• Cango's near-total pivot to Bitcoin mining (99% of Q1 2025 revenue from mining, with its traditional auto business now minimal) exposes it to extreme concentration risk and the long-term volatility and unpredictability of the cryptocurrency industry, threatening the stability and diversification of its revenue base.
  
• Significant increases in the global Bitcoin network's hash rate and mining difficulty, as seen in the sharp drop in April production, will continually pressure Cango's operating efficiency, raise marginal costs per coin mined, and directly constrain revenue growth while compressing operating and net margins.
  
• High and potentially rising electricity/power costs, compounded by reliance on premium-priced hosted operations and a slow shift to lower-cost energy, will serve as a persistent drag on gross profit and could erode the company's ability to achieve sustainable positive earnings, especially if Bitcoin prices fall or stagnate.
  
• Large operating losses (RMB 155.5 million in Q1 2025 vs. prior year operating income), driven by Bitcoin price declines and high cost structure, suggest Cango's earnings are highly sensitive to BTC market cycles and may remain negative or volatile; continued "mine-and-hold" strategy increases exposure to unrealized losses and further distorts net income.
  
• The collapse of Cango's auto-related business (RMB 7.6m in Q1 2025 revenue vs. RMB 64.4m prior year), minimal diversification of operating segments, and persistent, industry-wide digital disintermediation trends diminish the company's long-term ability to cushion against risks in crypto, making future revenues and earnings even more dependent on the highly cyclical mining sector.

Valuation

• The analysts have a consensus price target of $8.016 for Cango based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CN¥14.0 billion, earnings will come to CN¥627.8 million, and it would be trading on a PE ratio of 20.9x, assuming you use a discount rate of 9.2%.
• Given the current share price of $4.89, the analyst price target of $8.02 is 39.0% 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.