Pivot to Bitcoin Mining Reaps Rewards
CleanSpark (CLSK) has grown from a microgrid solution provider to a full-fledged bitcoin miner and based on investor reaction to its latest quarterly results, the plan appears to be working.
Shares rose last week after the company reported first-quarter revenue of $41.2 million, a new all-time high. Driven by higher BTC mining revenue ($37 million), revenue jumped 52% sequentially, with BTC mining revenue increasing 63% quarter-over-quarter. The year-over-year comparison shows an impressive jump of 1733%.
It should be noted that CleanSpark has only been generating BTC mining revenue since December 2020, and BTIG analyst Gregory Lewis believes the progress indicates a company is making all the right moves.
“With approximately 90% of total 1Q22 revenue coming from BTC mining, management quickly transitioned the business from a microgrid solutions company to a BTC mining company,” Lewis said. , before adding: “With an additional 0.2 EH of mining capacity already online in January and a current hash rate of 2.1 EH and our CY2022 year-end target of 275 EH, we expect CLSK to continue to execute its growth strategy.
With ~1.9 PE on order and ongoing deliveries through the end of October, the company should see the year with a hash rate of ~4 PE. Remaining CAPEX is approximately $40 million as platform growth is accompanied by new infrastructure construction, and the company is looking to increase infrastructure capacity with the addition an additional 40 MW by the middle of this year. CleanSpark prefers owning the infrastructure – i.e. “controlling its own destiny”, but if necessary they will also deploy rigs in colocation facilities.
Management has also indicated that its preferred funding source for the $40 million CAPEX required for this year’s targeted growth is debt, including “platform-backed financing” and is currently in discussions on the funding. BTC sales — as the company did in December when it offloaded 414 BTC for around $21 million to fund rig purchases — could provide another source of funding. “We note that a sale of the energy business has the potential to turn the tide and spur additional growth,” Lewis added.
Overall, Lewis rates CleanSpark shares a buy, although the price target drops from $35 to $30. Don’t worry, there’s still a 192% upside from current levels. (To see Lewis’ background, Click here)
Only one other analyst is currently tracking CleanSpark’s progress, but they’re also optimistic. With further buying, the stock has a Moderate Buy consensus rating, while the average target of $23 suggests the stock will climb around 124% over the coming year. (See CleanSpark stock analysis on TipRanks)
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Disclaimer: 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.