As cryptocurrencies like Bitcoin and Ethereum gather momentum among investors eager to ride the crypto-wave, Hut 8 (HUT), one of the leading Bitcoin miners, stands out with a 175% gain in the last 90 days, significantly outperforming Bitcoin and tech heavyweights like Nvidia (NVDA). In addition, the company recently secured a $150M investment to power its AI infrastructure and is primed for addition to the Russell 3000 Index.
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The company is well positioned for future growth, particularly if Bitcoin rallies higher. It is an intriguing option for investors interested in exposure to the growing cryptocurrency infrastructure industry.
Hut 8 Expands Its Facilities
Hut 8 is a vertically integrated operator of energy infrastructure and Bitcoin mining. It operates in four main sectors: Digital Assets Mining, Managed Services, High Performance Computing (HPC)- Colocation and Cloud, and Others.
In recent news, Hut 8 secured a $150 million investment from Coatue Management and boosted its Bitcoin production with upgrades at its Salt Creek site. The company has also transitioned away from using hosted facilities for miners and now operates its own sites, thus reducing the cost of mining Bitcoin due to lower energy expenditure.
The company anticipates a 30% reduction in mining costs in its facilities. The closure of an underperforming site, the movement of infrastructure from hosted to owned facilities, and the introduction of energy curtailment software are significant recent developments for the firm.
Further expansion is anticipated, as Hut 8 has announced definitive agreements for a site in West Texas. This site will provide Hut 8 access to 205 megawatts of immediately available power capacity.
Hut 8’s Recent Financial Results
The company reported Q1 2024 financial results, its first full quarter of operation since its merger with U.S. Bitcoin Corp in Q4 2023. Revenue of $51.74 million fell short of analysts’ expectations of $65.07 million, though it marked a considerable increase from $15.6 million year-over-year.
Net income grew to $250.9 million from $17.3 million when compared against Q1 2023. Adjusted EBITDA rose to $297.0 million from $11.1 million for the same period. Mining output grew with 716 Bitcoin mined compared to 524 Bitcoin in Q1 2023. The cost to mine Bitcoin increased significantly, from $9,072 to $20,419 for owned facilities. Earnings per share of -$0.17, falling significantly short of the analysts’ estimates of $0.59.
As of the end of Q1 2024, the company reported a balance sheet with $11.5 million in cash and 9,102 Bitcoin, valued at $648.9 million, with 7,230 Bitcoin, equivalent to $515.4 million, unencumbered. The company also reported a total debt of $177.6 million, of which $112.8 million is project-level debt with no minimum monthly repayment. This quarter also saw Hut 8 draw an additional $50 million from its coin-based loan, increasing the outstanding total to $64.8 million.
What Is the Price Target for HUT Stock?
The stock is highly volatile, sporting a beta of 2.95 and bouncing between $19 and $6.33 over the past year. It trades at the high end of its 52-week price range of $6.18 – $21.55 and shows ongoing positive price momentum, trading above the 20-day (14.50) and 50-day (12.25) moving averages. It trades at a relative discount, with a P/E ratio of 6.92x, compared to the Capital Markets industry average of 18.36x.
Analysts following the company have been constructive on the stock. For instance, Canaccord analyst Joseph Vafi, a five-star analyst according to Tipranks ratings, recently raised the price target from $14 to $22 while maintaining a Buy rating on the shares. He noted the importance of having sites and power to support the growing demand for high-performance computing, with positive trends toward the company’s 1.1GW development opportunity.
Overall, Hut 8 is rated a Moderate Buy based on five analysts’ recommendations and recently assigned price targets. The average price target for HUT stock is $15.37, representing a potential downside of 23.13% from current levels.
Final Analysis on HUT Stock
Hut 8 presents an enticing opportunity for savvy investors. The company is poised for significant growth, fueled by a recent infusion of capital to bolster infrastructure and expansion, as seen through its successful procurement of a site with 205MW of readily available power in West Texas. The company’s projected 30% reduction in mining costs and transition to self-owned facilities are well-timed strategic moves.
Although the stock price tends to be volatile, it trades at a relative discount, presenting an intriguing opportunity for investors to gain long-term exposure to this growth segment.
