These 2 ‘Strong Buy’ Bitcoin-Driven Stocks Show Promising Upside, Says Macquarie

Bitcoin, the flagship crypto, has had a particularly good month so far – September is usually Bitcoin’s worst month, but it’s showing a 11.5% gain this time around.

Sector experts, taking in last week’s half-percent rate cut, are predicting that cryptocurrencies generally will gain as access to credit eases.

The result, according to Macquarie analyst Paul Golding, is potential gains for crypto-related stocks in the near- to mid-term. In Golding’s view, the current market rally coincides with a sea change taking place in the crypto mining field – but the rally’s benefits to crypto stocks won’t be spread evenly.

“The bitcoin mining landscape is evolving rapidly despite a relatively consistent and commoditized set of inputs. Across power infrastructure, pricing, and delivery, alongside ASIC semiconductor procurement and thermal management, all miners are more or less working with the same sets of inputs, and within the same or similar local and global markets respectively, whether for power, chips, land, or AI clients. As such, differentiation comes by way of effective execution, in-house technological advancement, revenue diversification, and sufficient capitalization,” Golding opined.

Golding has followed up this outline by recommending two Bitcoin-driven stocks that he anticipates will surge by at least 90% within the next 12 months. Adding to their appeal, both stocks have earned a Strong Buy rating from the analyst consensus in the TipRanks database. Let’s take a closer look at what’s fueling this bullish outlook.

CleanSpark (CLSK)

We’ll start with a look at CleanSpark, a bitcoin miner that is committed to the use of low-carbon renewable energy in its operations. CleanSpark has shown that it’s possible to succeed at both sustainable energy use and successful bitcoin mining. The company has long backed power projects that feature wind, solar, nuclear, and hydro power generation for a low-carbon connection to the power grid, and has also long been an important purchaser of high-quality renewable energy credits. The company keeps its corporate headquarters in Nevada, and has active mining operations in Georgia, Tennessee, Mississippi, New York, and Wyoming.

As of the end of August this year, CleanSpark’s mining operations had 163,648 rigs deployed, with a combined hashrate of 22.6 EH/s. The company boasts an efficiency rating of 22.7 joules per terahash. The company’s bitcoin holdings at the end of last month totaled 7,558.

Earlier this month, CleanSpark made several moves that promise to increase the hashrate. The company acquired two additional mining sites in the state of Mississippi, and closed on a second site in the state of Wyoming. The Mississippi acquisitions cost a total of $5.775 million, and bring the company’s Mississippi data center portfolio up to 60.5 megawatts. And, on September 12, the company announced that its hashrate had exceeded 26 EH/s.

Looking ahead, CleanSpark has entered into agreements for multiple acquisitions in Tennessee, for 7 additional mining facilities. The purchase price comes to $27.5 million and is expected to add up to 22% to the company’s current hashrate.

Turning to the company’s stats, we find that CleanSpark mined a total of 478 bitcoin in August, and increased its hashrate during the month by 1.4 EH/s. In the fiscal 3Q24 report, released on August 9, CleanSpark reported $104.1 million in revenue, a figure that was up an impressive 128% year-over-year, although it did miss the forecast by $7.15 million. At the bottom line, the company ran an EPS loss in the quarter of $1.03 per share.

For Macquarie’s Paul Golding, this adds up to a company that has a plan and is acting on it. He writes of this firm, “CleanSpark has been aggressive in rolling up smaller institutional bitcoin miners over the past year. The company also has been able to keep to its original ethos of low-carbon/ carbon-free sourced power, with its 2023 corporate Sustainability Report citing a 90%+ clean energy mix, while its recent GRIID acquisition could bring the aggregate power pipeline to 1GW+ operating or underway. We believe that from an operational perspective, while there has been some community pushback on sound pollution at Sandersville from air-cooling, CleanSpark’s meaningfulness to grid stability in Georgia, along with expanding liquid immersion deployments, position it well across a social license to operate/ sustainability angle, potential efficiency upscaling across acquired sites, and favorable power dynamics.”

Putting this stance into quantifiable terms, Golding rates CLSK as Outperform (Buy), with a $20 price target pointing toward a 98% gain in the next 12 months. (To watch Golding’s track record, click here)

Overall, this stock gets a Strong Buy consensus rating from the Street, based on 5 reviews that break down 4 to 1 in favor of Buy over Hold. The shares are priced at $10.09 and their $23.10 average target price implies a gain even more bullish than Golding allows, 129% for the coming year. (See CLSK stock forecast)

Riot Platforms (RIOT)

The second stock we’ll look at here is Riot Platforms, a bitcoin miner from Texas that has long held the largest single crypto mining operation in North America. This operation, the Rockdale mining facility in Texas, uses both air- and liquid-cooled mining rigs and was completed in 2023. The facility’s total capacity, 700 megawatts, is fully developed, with 500 megawatts devoted to air-cooled systems and 200 megawatts to immersion cooling. The facility employs 250 people and has a hashrate of 14.7 EH/s as of June 30 this year.

That’s only one of Riot’s mining facilities, however. The company also operates the Corsicana facility, another mining op located in Texas. Corsicana began development in 2022 and its expansion is ongoing; Riot has completed 400 megawatts of the facility’s 1 gigawatt capacity, with all 400 megawatts being immersion-cooled rigs. Corsicana currently has 135 employees and a hashrate of 7.5 EH/s as of August 31. And finally, Riot is developing two sites in Kentucky. These operations began in 2021 and have yet to be completed. They have a potential capacity of 300 megawatts, of which 110 megawatts are contracted and 60 are developed, all air-cooled. The hashrate of the Kentucky facilities is modest, at 1.2 EH/s.

During the month of August, Riot maintained an average operating hashrate of 14.5 EH/s, and produced 10.4 bitcoin per day. The company finished the month with holdings of 10,019 bitcoin, up 3% month-over-month and 37% year-over-year.

We last saw quarterly financial results from Riot for 2Q24, released this past July. In the second quarter, Riot realized $70 million in total revenues, for an 8.7% y/y decline – and missing the estimates by $1.58 million. The company’s bottom line also missed the forecast, coming in 18 cents per share below expectations at a net loss of 32 cents per share by GAAP measures. The company’s Q2 bitcoin production came to 844, for a 52% year-over-year decline.

Despite the Q2 decline, Golding sees reason for optimism here, based chiefly on Riot’s scale. He says of the company, “Riot long held the title of operator of the largest North American bitcoin mining site, Whinstone, in Rockdale, TX, arguably setting the tone for the nascent sector across aspirational scale, power relationship with a utility, and technological testbed with respect to liquid immersion. Since then, Riot has iterated on this formula, currently developing another massive site in Corsicana, TX (~1 GW), and employing multiple progressive generations of closed-loop liquid cooling, relatively bespoke to Riot’s application, and poised to potentially extend the useful life, reliability, and overall performance of miners meaningfully. Riot continues to be the most scaled vertically-integrated pure-play miner, shying away from HPC/ AI for now, though its liquid cooling tech has value broadly, including to a host of latest-gen GPUs.”

Golding goes on to give this stock an Outperform (i.e. Buy) rating, complemented by a $15 price target that suggests the shares have a potential one-year gain of 93%.

This is a bullish view, but the Street’s consensus is even more so. The stock has a Strong Buy rating – and it is unanimous, based on 11 recent positive reviews. The shares are currently trading for $7.77 and the average price target, now at $16.77, implies the stock will appreciate by 116% by this time next year. (See RIOT stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.