Canaan stock surges after bullish analyst call, calling it an indirect bitcoin play

Shares of Canaan Inc. CAN, +0.54% rallied 3.2% in premarket trading, after Benchmark analyst Michael Legg started coverage with a buy rating, saying the computing solutions company is an indirect way to invest in the growth of bitcoin BTCUSD, -0.45%. Legg placed a $9 price target on the stock, which implied 136% upside to Tuesday's closing price of $3.81. Legg noted that Canaan, which is incorporated in the Cayman Islands, with subsidiaries in China, is the second largest player in the "oligopolistic" bitcoin mining industry. "While operations fluctuate alongside the price of bitcoin, our viewpoint is bitcoin is here to stay and the long-term trends are favorable," Legg wrote in a note to clients. Although Legg indicated that the stock already trades at a premium, he believes it is the only public mining rig manufacturer that should trade at a premium, "given its strong cash position and market share." The stock has tumbled 26.0% year to date through Tuesday, while bitcoin has sunk 24.9% and the S&P 500 SPX, -2.91% has declined 21.7%.