Why Cray Stock Could Be the Next Bitcoin Play

cray stock

Cray Supercomputing Prowess Could Mine for Bitcoin

So, I think I caught your attention with my mere mention of Bitcoin, but I don’t have a cryptocurrencies play. Rather, it’s a supercomputing company that could be used for mining Bitcoin.

Of course, that’s only my conjecture, and not based on anything said about Cray Inc. (NASDAQ: CRAY), a provider of supercomputing services, storage and data management systems, and advanced data analytics.

My thinking is that the complexity and computing power required to mine for Bitcoin could be achieved via Cray’s supercomputing solutions.

Now, I may be totally off tangent on my assessment for Cray, but the 40-year-old company started by computing wizard Seymour Cray has loads of potential.

Cray stock is up 18.4% year-to-date, underperforming the NASDAQ and S&P 500 but advancing 26% over the past three months.

On the chart, Cray stock recently broke higher out of a sideways trading channel, at around $21.00. That was accompanied by a bullish golden cross pattern and an upside trade gap.

Cray stock chart

Chart courtesy of StockCharts.com

My technical view is that Cray stock is heading higher and has abundant upside potential for big gains. The shares of Cray are still well below the $40.00 level from March 2016, representing a potential return of 67% and higher.

The downside risk for Cray stock is appropriately $18.00, which is the previous base prior to the breakout, so I like the risk-to-reward profile.

What Cray Stock Needs to Do

The prospects for Cray will depend on its ability to push its supercomputing and data analysis solutions to clients who demand complex and powerful computing resources, which is the reason why I mentioned mining for Bitcoin.

Consistency in its revenues and earnings will be the focal point for Cray.

Revenues did surge 29% in 2015, but this was followed by contraction of 13.1% in 2016.

The outlook for the end of 2017 was soft, with revenues predicted to decline by another 36.3% to $401.47 million, but there is some relief in 2018, when revenues are estimated to rally 25.7% to $504.7 million, and as a high as $613.0 million. (Source: “Cray Inc. (CRAY),” Yahoo! Finance, last accessed December 29, 2017.)

But, while revenues contracted in 2016, Cray managed to control its cost side and expanded the key gross margins to 35% (versus 31% in 2015).

Cray needs to continue to strengthen its gross margins while it deals with hopefully ramping up revenues. If Cray can accomplish this, there would be no reason not to expect Cray stock to appreciate.

Analyst Take:

Whether Cray supercomputers are used to mine Bitcoin or used for other complex issues, the prospects for share appreciation is high, given the massive demands for big-data analytics and other supercomputing needs.

Happy New Year!