The market is experiencing a general decline in 2022 – but few market segments are affected like crypto, with the main currency, bitcoin, down 64% this year.
But just because bitcoin is down doesn’t mean investors can’t make money in crypto. This fact should pay attention to crypto miners, companies that buy and maintain the extensive computer servers needed to maintain the block calculations that support crypto production. They make money by selling some of their mined bitcoins, so finding the right balance between facility fees and bitcoin price is essential to success.
Analyst HC Wainwright Kevin Dede acknowledged the problem in a recent note on the bitcoin mining industry. He wrote, “Financial pressures related to a prolonged price depression, although not new, can put a greater weight on the performance of bitcoin mining operations – certainly not a new observation for those embedded in the crypto-verse.”
However, Dede recommends ‘driving while looking at the front windshield as opposed to the rearview mirror,’ meaning, to see the future. And here Dede expects the price of bitcoin to rise to $22,300 or even higher by the end of 2023, although he prefers to take a conservative stance.
In simpler words, Dede sees better days ahead for the industry. In his view, the price of crypto has previously eliminated the inappropriate, and among those that remain, some should be reconsidered by investors. So let’s do it. Using it TipRanks data platform, we have pulled details on several players in the bitcoin mining industry, all Buy-rated with three-digit potential up for the coming year. This, along with comments from analysts.
Riot Blockchain, Inc. Stock price history (RIOT)
First on our list, Riot Blockchain, is a small company, with a market capitalization of $550 million, but it is one of the main players in the US crypto mining sector. The company’s operations are based in Texas, and the company has 72,428 distributed mining sets with a total hashrate of 7.7 EH/s (at the end of November). Riot is in the process of expanding its operations, and aims to achieve its own mining hash rate of 12.6 EH/s during 1Q23.
This is an ambitious goal, and Riot seems to have the ability to achieve it. The company reported generating 1,042 bitcoins during 3Q22, the last reported quarter, which generated a total of $46.3 million. The top line is down significantly from last year, when 3Q21 saw $64.8 million, due to lower bitcoin prices and lower bitcoin production. This was partially offset by $13.1 million in earned power reduction credits.
At the end of Q3, Riot can boast deep pockets. The company reported $369.8 million in working capital, which includes $255 million in cash and liquid assets on hand, as well as 6,766 bitcoins. Bitcoin holdings are produced by the company’s independent mining operations.
Roth Capital Analyst Darren Aftahi saw an interesting path for RIOT, and put it earlier this month, writing, “While the growth in the hashrate of the network has slowed down over time, we believe that the challenging environment will continue until 2024 which is the anticipated halfway date. , we can see more Miners are moving offline. The ongoing financial problems of other miners create an opportunity for RIOT to take advantage of slower network hashrate growth (gain market share) and potentially see better prices for machine orders in the future, as OEMs must remain competitive on price with used machines that can beat the market.These factors create a good growth environment during the BTC bear cycle for well-capitalized BTC miners.
Extrapolating forward, Aftahi assigns a Buy rating on RIOT stock, along with a price target of $11 indicating a strong one-year upside potential of 222%. (To watch Aftahi’s track record, click here.)
The Strong Buy consensus rating on RIOT is supported by 8 unanimous Buys. With an average target of $10.79, the stock will appreciate 215% in the next year. (Read Riot Blockchain stock predictions at TipRanks.)
CleanSpark (CLSK)
Next up is CleanSpark, a bitcoin miner with a twist – it aims to be the first bitcoin mining company to operate on renewable energy. This is an important factor, because bitcoin mining is an energy-intensive endeavor, using a lot of electricity. CleanSpark’s selling point is that it aims to be a fully-fledged ‘clean energy’ player in the bitcoin field.
CleanSpark recently completed its 2022 fiscal year, and released its financial results. On the top line, the company had annual revenue of $131.5 million, up 235% y/y. The increase represents the increase in computing power that CleanSpark has brought online during the year. In the fourth quarter of the year, revenue came in at $26.2 million, up 14% from the previous year’s period.
The income is supported and produced by the mining activity of CleanSpark, which is operating with a current hash rate of 5.5 EH/s at the end of November this year. This is up 320% y/y, and represents the company’s continued expansion of capabilities.
Backing up operations, CleanSpark lists its current total assets as $50.8 million. This includes $20.5 million in cash and $11.1 million in bitcoin holdings. The company has a total of $386.6 million in mining assets, an amount that includes commissioned miners and prepaid deposits on delayed delivery machines.
Mike Colonnese, in this stock coverage for HC Wainwright, issued a bullish position only. “We believe the company is one of the best miners to navigate this long crypto future based on its scale, operating efficiency, solid balance sheet, and relatively tame electricity costs,” Colonnese said. “CLSK remains one of the top picks in the crypto mining sector… We believe the stock is significantly undervalued at current levels, trading at just ~0.6x our F2023 revenue estimate.”
Colonnese’s Buy rating here is supported by the Street’s top-of-the-line $12 price target indicating a strong 515% gain ahead for the stock. (To watch Colonnese’s track record, click here.)
All 3 of the recent analyst reviews on CLSK stock are positive, creating a strong Buy consensus rating. At $7.33, the average target price represents a 276% upside over a one-year horizon. (Read the CleanSpark stock forecast at TipRanks.)
Applied Digital Enterprise (APLD)
The last company on our list, Applied Digital, has had some changes recently. Last November, the company officially changed its name, from ‘Applied Blockchain’ to its new moniker, Applied Digital Corporation. The new name reflects the company’s more diversified approach, from just blockchain mining to also designing, building, and using advanced infrastructure and network data center server installations that power bitcoin mining. The company’s stock ticker, APLD, remains the same.
Applied has a 100-MW hosting facility in Jamestown, North Dakota, and on December 14 announced the groundbreaking of a 5-MW dedicated processing center located next to the existing facility. The move is a step into the high performance computing (HPC) industry, a move Applied is taking to tap into the potential $65 billion addressable market – and to reduce its dependence on bitcoin.
In the meantime, the company continues to mine bitcoins, and generated revenue of $ 6.9 million in the first quarter of the fiscal year 2023 – the last quarter on August 21, 2022. The quarterly revenue reached the height of the previously published guidance.
After the new fiscal 1Q, the company broke ground on its third co-hosting facility, a 180-MW facility under construction in Ellentown, North Dakota. This facility has been contracted to full capacity.
We’ll check back with Wainwright’s Kevin Dede, who explains his reasons for supporting this name. He wrote, “Our confidence in Applied is driven by: (1) a predictable, ongoing revenue model and future revenue streams supported by low and stable electricity costs; (2) demonstrated success in operating the Jamestown facility and progress in outbuildings and fully contracting Garden City and Ellendale sites; (3) strategic partnerships with respected industry players that provide significant advantages in expansion; (4) cash position and financing options that can finance existing operations and expansions; and ( 5) diversifying revenue streams through HPC and launching distressed mining asset funds.”
The comments support Dede’s Buy rating on APLD, while his $4 price target raises 113% upside over the next year. (To watch Dede’s track record, click here.)
Applied Digital only has 2 recent analyst reviews, but both are positive, giving it a Moderate Buy consensus rating. Additional analysts are even more bullish than Dede; combined, the average target of $4.75 makes room for 153% growth next year. (Read Applied Digital’s stock forecast at TipRanks.)
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Disclaimer: The opinions expressed in this article are those of the featured analyst. The content is used for informational purposes only. It is very important to do your own analysis before making an investment.
