Bitcoin Valuation Update: What is the Market Missing?
|52 Week Range||$6.92-$42.60|
|Avg. Daily Vol. (30 day)||1,839,646|
|Shares Out (MM)||35.6|
|Market Cap (MM)||$469.80|
|Insiders Own %||8.4%|
|Short Int./% of Float||4,150k / 12.3%|
|Debt to Equity||0.5%|
|Revenue TTM (MM)||$24.2|
|Fiscal Year End||September|
- Management believes CleanSpark is currently trading at a steep discount to bitcoin mining comparables (2.2x forward revenue vs. 5.7x industry average). Bitcoin is a commodity, yet CleanSpark is not getting credit for its mining operation that is profitable at price levels above ~$6,000 per bitcoin and contributes ~85% margins to CleanSpark’s bottom-line.
- The company believes the disconnect lies in the legacy energy business that receives a lower multiple than pure play bitcoin miners due to its much lower ~15% margins and slower growth rate.
- CleanSpark believes it has a competitive moat compared to other bitcoin miners as it owns ~85% of its production capacity compared to peers who mainly rely on third-party data centers.
- The use of “outsourced” data centers reduces mining margins and creates additional risks as any downtime equates to lost bitcoin, plus CleanSpark retains the real estate value, which could increase over time as demand grows from exited Chinese miners getting their rigs back online in the US.
- CleanSpark also controls its own power supply with 50 MW of capacity secured and energy prices below 2.85 cents per kWh. Furthermore, the company mines with ~95% low-carbon energy today, unlike most miners, and is focused on getting to 100% low-carbon energy.
- As of August 17, 2021, CleanSpark’s hashrate capacity exceeded 820 PH/s or 6-7 bitcoins per day, an increase of ~100% from 46 days ago.
- Management expects bitcoin mining revenue to contribute $38-48 million in FY21. With an FY22 production target of 3.2 EH/s, annualized bitcoin mining revenue could exceed $325 million, assuming the production of 25-28 bitcoins per day and a price of $35,000+ per bitcoin.
- Our prior content on CLSK can be accessed HERE.
The market for microgrids is in a long-term secular growth trend, and CleanSpark is well-positioned to capitalize on this as it offers a differentiated, vendor agnostic software and hardware solution that provides significant ROI for customers. Additionally, CleanSpark is focused on scaling its bitcoin mining operation using ~100% low-carbon energy and believes this business can contribute $38-48 million in revenue in FY21 and over $325 million in annualized revenue by September 2022. Currently, CleanSpark contributes ~1% of the global bitcoin capacity.
The company is a smaller player in an industry dominated by much larger, well-capitalized competitors. CleanSpark has proven its ability to compete effectively but will need to continue to expand its sales network and ensure its technology agnostic software platform evolves with the industry. On the bitcoin side of the equation, an increase in mining difficulty rates would reduce the company’s bitcoin yield and associated revenue, and bitcoin price fluctuations would impact the profitability of the operation.
Management believes CleanSpark is currently trading at a steep discount to bitcoin mining comparables (2.2x forward revenue vs. 5.7x industry average). Bitcoin is a commodity, yet CleanSpark is not getting credit for its mining operation that is profitable at price levels above ~$6,000 per bitcoin and contributes ~85% margins to CleanSpark’s bottom-line.
Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.
WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information p...