Canaan: I'm In With Call Options As Sentiment Has Finally Turned Around

Summary I see clear signs of a turnaround in the sentiment surrounding this ￰0￱ include both company-wide developments and tailwinds in the crypto ￰1￱ September 8 Luxor financing, September 30. Soluna's 20 MW A15 XP deployment and the Oct 2, 50,000 A15 Pro order are strong news leading to a breakout beyond $1. Industry-wide, Riot’s hashrate reached 36.4 EH/s in August with BTC production +48% ￰2￱ recently secured $200M in ￰3￱ is consolidating $100k–$125k. I believe a breakout could spur miners’ ￰4￱ remain tied to Bitcoin price volatility.

I'm betting that near-term tailwinds (anticipated rate cuts, softer dollar, and historically strong October for BTC) keep sentiment and purchasing momentum intact. I initiate my coverage on Canaan Inc. ( CAN ) with a strong buy rating after I noticed clear signs of a much-needed turnaround in the sentiment surrounding this ￰5￱ me, fundamentals alone are not enough to buy a stock. That's why I never considered adding this stock to my portfolio since the decline at the end of last year, despite the top-line growth (please notice that the decline I'm referring to is part of a broader decline since the ATHs in 2021).

My investment style, which I mostly consider akin to gambling, needs a story, a compelling narrative, followed by irrational optimism. I see these signs in Canaan (and the broader crypto space), which made me start a highly speculative position in the form of call options. First, on September 8, Luxor began offering financing to Canaan’s mining ￰6￱ than 5,000 A15 Pro units were sold in August to a leading U. S.

miner. Second, on September 30, the company announced a 20 MW deployment at Soluna in Texas using the A15 XP, slated to start in Q1 ￰7￱ icing on the cake happened with the October 2 announcement, when Canaan announced the largest order in three years; over 50,000 A15 Pro units for a ￰8￱ with delivery in Q4 ￰9￱ these announcements come on top of high top-line growth, with the Street projecting double-digit growth for the next few ￰10￱ a valuation basis, the stock looks quite attractive, trading below sales on a TTM basis at the time of writing this article. Overall, I believe there is plenty of upside ahead with tailwinds in the crypto space that could lead to more CapEx being deployed.

Below, I lay out the pillars of my bull case. A Turnaround In Sentiment On September 8, Canaan announced a partnership with Luxor Technology Corporation to expand financing for institutional ￰11￱ to the terms, Luxor will now offer financing directly to Canaan's mining customers for purchasing the Avalon miners. Unfortunately, I haven't been able to find any specific rates or tenors that could benefit from this partnership, aside from the following statement: The partnership already facilitated the sale of more than 5,000 Avalon® A15 Pro bitcoin mining machines in August to a leading U. S.-based institutional bitcoin ￰12￱ enough, Canaan's stock was flat on September 8 and September ￰13￱ However, as you can see above, September 8 was the spark of the bull run that happened in the following weeks.

I believe the market was not that convinced that the partnership would change the sentiment, which is why the reaction around September 8 and 9 was ￰14￱ September 30, the company announced a 20 MW deployment with Soluna at a wind-powered data center in ￰15￱ to the deal, Soluna selected the Avalon A15 XP Bitcoin miner for this deployment, with a planned start in Q1 ￰16￱ though no pricing, contract length, hosting rate, revenue split, or capex/opex allocation were disclosed, this news was enough for the market to regain the much-needed optimism in Canaan, and following the announcement, the stock climbed by 18%. This is when the stock popped up in my screener.

However, on October 1, I was still not convinced. Why? Price ￰17￱ October 1, I was looking at the chart below and I was trying to understand if the recent news was enough to turn around the sentiment and break out beyond $1. TradingView Back then, I took a look at fundamentals, and I couldn't really understand why the stock was trading below $1, considering the top-line growth for the past four ￰18￱ Alpha From my experience as a market practitioner, fundamentals and (emphasis) price action have to make sense for a turnaround story to take ￰19￱ just on strong fundamentals, when the chart looks like the Niagara waterfalls (to put it nicely), is the number one rookie mistake that I see, especially around value investors reluctant to look at charts (stating the random walk argument, which I believe is absolutely wrong).

That's why I was hesitant to buy on October 1. I am the type of investor who would happily pay a premium on the share price at the expense of higher conviction, especially when I am dealing with risky, overpriced ￰20￱ announcement on October 2 was the final confirmation that I (and I believe many investors) needed to open a ￰21￱ day, Canaan secured its largest order in three years: a landmark US order, comprising over 50,000 Avalon A15 Pro miners from an undisclosed US customer, scheduled for Q4 2025 ￰22￱ was the perfect catalyst at the perfect ￰23￱ seen below, the share price gapped through the $1 resistance, jumping by 27%. TradingView That was the second-highest day by trading volume for the stock, with 121 million shares exchanging ￰24￱ me, this last order is the ultimate evidence of a recovering US mining ￰25￱ in August, Riot deployed hashrate up to 36.4 EH/s, with BTC production up by 48% ￰26￱ recently added $100M bitcoin-backed capacity with Coinbase Prime and another $100M facility with Two ￰27￱ what I'm reading, these funding rounds were explicitly to fund energy and compute ￰28￱ the Bitcoin price in a consolidation phase, trading between $100k - $125k, I believe there is plenty of upside ahead for the US-based miners once Bitcoin breaks out beyond $125k.

Again, as an active market practitioner, I believe a breakout after a consolidation phase is a hyper bullish ￰29￱ On a valuation basis, I see a cheap company trading below sales on a TTM ￰30￱ looking at the projections for next year, the P/S multiple is 1, which is 70% below the sector ￰31￱ that the company is not profitable, we cannot talk about P/E ￰32￱ we have is top-line ￰33￱ seen below, the figures that the Street is projecting are really ￰34￱ Alpha Cheap multiples, combined with strong top-line growth and an improvement in sentiment, are music to my ￰35￱ said, there are risks to my bull ￰36￱ I strongly believe that the growth figures that the Street is projecting above have priced in a significant price increase in ￰37￱ the high volatility of Bitcoin, the biggest risk that I see for my thesis is a decline in BTC price, which would slow down the CapEx deployment of miners, as they would have less incentive to operate their centers at full steam.

Naturally, this would depress the number of new orders for Canaan's mining machines, leading to a deterioration of sentiment and ￰38￱ bet with Canaan is that this is not going to happen in the near ￰39￱ more rate cuts ahead (CME projects rates between 350-375 bps before year-end, with 88% certainty) and a softer dollar (dollar sits sub 98 on DXY), I believe Bitcoin has strong tailwinds to break from the consolidation phase that I mentioned before. Also, historically, October has been BTC’s best month , with a median 10.8% ￰40￱ I stick my neck out with my strong buy rating, and I bought January 16, $1 call options to back up my thesis. Overall, I believe the recent partnership with Luxor will lead to more deals with institutional US-based ￰41￱ October 2 announcement, being the largest order in three years, is a strong sign that the miners are deploying CapEx ￰42￱ tailwinds in the crypto space, mainly from further rate cuts, a softer dollar, and favorable seasonality in October, I believe we would see a breakout beyond $125k before ￰43￱ does this mean for Canaan?

Well, in this scenario, I believe US-based miners would have more incentives to operate, which will likely increase their CapEx needs, leading to more purchases from Canaan.