The performance of bitcoin mining companies is naturally closely correlated to the price of BTC. Given the current overall bearish trends of the crypto industry – bitcoin is down 35% year-to-date – it’s hardly surprising to see depressed share prices for public bitcoin miners. For example, shares of Hut 8 (HUT) have shaved off 66% of their value since the turn of the year.
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However, even in the face of the current difficult environment, following the company’s latest quarterly update, Canaccord analyst Joseph Vafi thinks Hut 8 is making all the right moves.
“We think the management team is executing well on its plan to opportunistically expand the mining operations while also diversifying the business model,” the 5-star analyst said. “Given a P&L valuation equivalent to peers, combined with the growth catalysts of recent equity raises and access to cheap power, we like the earnings potential here.”
Hut 8 also has HODLer status, keeping all of the bitcoins it has mined. There were 942 BTC excavated in Q1, with the total now standing at 6,460, which is currently worth ~$185 million and makes the valuation even more “attractive.”
Moreover, last year’s mining crackdown in China has allowed the company to “opportunistically exploit” the supply chain and obtain more than an exahash of new mining gear, the result of which is continued exahash ramp at current facilities.
And to adopt a 100% self-mining business model, in April, the company entered into an agreement to buy all of the mining equipment from HUT’s only hosting client.
This follows on from last year’s announcement of 12,000 new miners bought from MicroBT at ~$50/TH, which could generate mining power up to 1.17EH/s. Since January, each month ~1,000 miners are arriving at HUT, and over the coming months, their full deployment will bring Hut 8’s contracted Bitcoin mining capacity to 3.57 EH/s.
As such, Vafi maintained a Buy rating although given the fact all BTC miners are “quite exposed to both the up and downsides of volatility in underlying spot price,” the price target is lowered from $12 to $6. Nevertheless, there’s still upside of 129% from current levels. (To watch Vafi’s track record, click here)
Overall, all of Vafi’s colleagues agree with his thesis. The stock boasts a Strong Buy consensus rating based on a unanimous 5 Buys. The average target remains decidedly bullish; at $12.26, the figure makes room for 12-month upside of 347%. (See Hut 8 stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
