Bitcoin might have cemented its status as “digital gold,” but one other widely touted purpose has yet to properly play out. The daddy of crypto is supposed to be a hedge against inflation but recent times have shown that soaring inflation has not provided a tailwind. In fact, Bitcoin's performance has followed the lead of the equity market, and mirroring the wide downturn in 2022, bitcoin’s price has tumbled over 70% since peaking last November.
That said, the “death of bitcoin” has been announced countless times before and one thing bitcoin has been adept at doing over its decade-plus history is bouncing back eventually.
While Deutsche Bank's Marion Laboure does not anticipate last year’s peak to be achieved over the near-term, using S&P 500 stocks as a reference, and factoring in the effect of higher interest rates, the senior strategist believes that by the end of the year, bitcoin’s price could climb back up to $28,000 – a 45% increase from current levels. And where the BTC price goes, so do the prices of stocks operating in its ecosystem.
With this in mind, we scoured the TipRanks database and homed in on three names which are set to benefit from a potential rise in bitcoin’s value. They all operate in the BTC mining space, they are rated as Strong Buys by the analyst community, and they offer plenty of upside potential in the year ahead. Here’s the lowdown.
Core Scientific (CORZ)
Let’s first take a look at Core Scientific, one of the figureheads in high-performance, net carbon neutral blockchain infrastructure and the mining of digital assets.
Outstanding mining performance aside - for its own mining operations last year, the company mined 5,700 BTC, the biggest annual haul ever by a publicly-traded company (Core also mines for its customers too) – the company stands out due to a number of unique selling points. Core has its own infrastructure and data centers, which in order to reduce risk, are geographically scattered across Texas, North Dakota, Oklahoma, North Carolina, Kentucky, and Georgia. And to oversee its miners and boost efficiency, the company has developed its own software, Minder. Furthermore, to seek out additional opportunities in blockchain, the company also boasts its own R&D team.
As noted above, the 2021 production outpaced all rivals, and the good news is that the company remains on track to beat that performance in 2022.
In the latest quarterly report – for 1Q22 - revenue saw a 254.9% year-over-year growth to reach $192.52 million, although the figure came in just shy of the $196.67 consensus estimate. That said, adj. EPS of $0.31 handsomely beat the Street’s $0.09 call. Digital asset mining income reached $133 million vs. the $9.63 million of the same period 12 months ago, while hosting revenue from clients came in at $27.34 million compared to $8.4 million in 1Q21.
However, when bitcoin hits the skids, bitcoin miners are naturally affected too. CORZ stock hasn’t been immune to the bearish developments; since going public via the SPAC route in January, the shares have lost 84% of their value.
That said, Cowen analyst Stephen Glagola thinks the company is “well positioned to navigate the current environment,” and believes it stands head and shoulders above the competition.
“We view Core Scientific as the best-in-class operator in the bitcoin mining industry due to the combination of its industry-leading BTC production and operations at scale, low jurisdiction risk with geographic diversification across the U.S., and experienced management team with a strong track record in operations and capital allocation," Glagola wrote.
"While ownership of mining rigs and data facility infrastructure brings incremental on-site expenses and infrastructure capex vs. an asset-light model, Core benefits from its economies of scale in production and resulting leverage per on-site/corporate overhead expenses,” the analyst added.
Accordingly, Glagola rates CORZ an Outperform (i.e. Buy) while his $3.10 price target makes room for 12-month gains of 105%. (To watch Glagola’s track record, click here)
Those are some nice gains, but they pale in comparison to Glagola’s colleagues’ expectations. The Street’s average target stands at $8.22, implying shares will climb 444% higher over the one-year timeframe. Rating wise, all 5 recent analyst reviews are positive, providing the stock with a Strong Buy consensus rating. (See CORZ stock forecast on TipRanks)
Marathon Digital Holdings (MARA)
Now let’s look at Marathon Digital Holdings. This bitcoin miner has set its sights on becoming North America’s largest mining operation whilst also boasting one of the lowest energy costs.
The business has agreements with outside service providers to connect its own mining equipment to power and the internet. The company's miners are located in Texas, South Dakota, Nebraska, and Montana. Most are based at a 105 MW power facility in Hardin, Montana and at the company's Texas facilities - which Compute North hosts.
The company is still working at fully deploying its fleet, and as the mining fleet expands, the company's EH/s hash rate should increase. That said, Marathon has seen its expansion plans hit by some headwinds recently – literally speaking.
Due to a storm that passed through Hardin, MT back in June, the company’s mining operations in the area have been without power. Marathon recently said that by the first week of July the miners will be back online, although in a lowered capacity for now.
Present problems aside, Chardan analyst Brian Dobson reckons the miner count will reach ~200,000 in 2023E, while the ”large influx” of rigs over the next year should push the company's hashrate to ~24 EH/s by 2H23E - up from 3.6 EH/s in January this year.
“As a result,” says the analyst, “MARA could control ~8.5% of the global hash rate by 2023E, generating a monthly run rate of 2,300 BTC.”
That is not the only aspect Dobson likes about Marathon.
“The company's strategy to HODL, or hold, coins (+9,673 coins and rising) makes a compelling way to indirectly own crypto assets for investors that can not directly own the category,” Dobson noted. “We are positive on Bitcoin transformative prospects long-term but expect volatility to persist near-term.”
That volatility has seen shares severely contract in 2022 - down by 83% year-to-date, although Dobson sees plenty of gains ahead. Along with a Buy rating, the analyst gives MARA a $19 price target, suggesting 243% upside a year from now. (To watch Dobson’s track record, click here)
In general, other analysts are even more upbeat; the average price target stands at $25.88, implying shares will climb 367% higher in the year ahead. Rating wise, based on 6 Buys vs. 2 Holds, the stock claims a Strong Buy consensus rating. (See MARA stock forecast on TipRanks)
CleanSpark is an interesting case, as the company clocked the opportunity in mining and hodling bitcoin and underwent a big transformation to do so. CleanSpark once offered integrated microgrid solutions, then it added another feather to its cap: it started mining bitcoin, and now the mining business has overtaken the prior one and generates the bulk of the revenue.
And as the Bitcoin mining operation has ramped (the company has only been generating BTC mining revenue since December 2020), revenue has increased dramatically. The latest results, for FQ2 (March quarter), saw revenue increasing four-fold to $41.6 million from $8.1 million in the same period a year ago. Adjusted EBITDA also improved meaningfully to $22.5 million vs. the $1.9 million exhibited in F2Q21, although the company recognized a net loss of $171,000 in the quarter, a step back after generating profits of $7.4 million in the same period a year ago and $14.5 million in F1Q22.
Chardan’s Brian Dobson notes there have been reports in the industry which indicate some smaller private firms are having financial issues. This particularly pertains to smaller mining companies which might not be able to finance current orders without prior hosting approval. Due to a shortage of hosting plugs, this could become a problem. But this could be good news for CleanSpark.
“In our view,” the analyst said, “this could play to CLSK's favor. We anticipate that established players with ready access to infrastructure will be able to procure mining rigs at significant discounts. This could prove to be an incremental positive for the company's margin. We expect CLSK's rig count to increase to over 73,000 by the end of FY2023E resulting in global hash rate share gains.”
As such, Dobson rates CLSK shares a Buy and backs it up with a $12 price target. The implication for investors? Potential upside of 204% from current levels.
Two other analysts have recently reviewed CLSK’s prospects, and they are positive too, making the consensus view here a Strong Buy. The average price target is also a bullish one; at $12.67, there’s room for ~221% upside in the year ahead. (See CleanSpark stock forecast on TipRanks)
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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.Click Here To Get Funded!