Up 103% YTD, Is Cleanspark Stock Overvalued?

Shares of Bitcoin mining companies have been on an absolute tear in recent months as the digital asset trades near all-time highs. Generally, the stock performance of BTC mining companies is tied to Bitcoin prices. So, you should expect crypto mining companies to deliver outsized gains during bull runs, and trail the broader markets by a wide margin when broader cryptocurrency sentiment turns more bearish. 

Valued at more than $1 trillion by market cap, Bitcoin (BTCUSD) is the largest cryptocurrency in the world. BTC prices have surged over 300% in the last 15 months, driving valuations of crypto mining companies higher as a result. 

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One Bitcoin mining stock that has caught the attention of investors is Cleanspark (CLSK), with the shares surging 103% year-to-date and a whopping 792% in the last 12 months. Let’s see if Cleanspark is fairly valued or overvalued at current multiples.

How Did Cleanspark Perform in Fiscal Q1 of 2024?

Valued at $4.5 billion by market cap, Cleanspark is a U.S.-based Bitcoin miner. It owns and operates data centers that run primarily on low-carbon power. In fiscal Q1 of 2024 (ended in December), Cleanspark reported revenue of $73.8 million, an increase of 165% year over year. Its net income stood at $25.9 million, or $0.14 per share, compared to a loss of $29 million, or $0.46 per share in the year-ago period. The company also reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $69.1 million, compared to a loss of $2 million in Q1 of fiscal 2023. 

The recovery in BTC prices allowed Cleanspark to beat revenue and earnings consensus estimates by a wide margin in the December quarter. Notably, Cleanspark reported sales of $168 million in fiscal 2023. So, in a single quarter, it covered almost half the distance to reach its total revenue from last year. 

A Focus on Hashrate Improvement

During the earnings call, Cleanspark stated it aims to achieve a mining capacity of 20 exahash per second in the first half of the year. A higher hash rate suggests the miner’s computation power is higher, allowing them to solve complex problems faster and receive additional rewards while mining Bitcoin. 

Typically, a higher hash rate can lead to an improvement in profit margins for miners, as the chances of successfully mining a block are higher. But an increase in hashrate results in higher energy consumption, which acts as a headwind for profitability. 

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Last month, Cleanspark announced it completed the acquisition of three Bitcoin mining data centers, which boosted its operating to more than 15 exahashes per second (EH/s). It grew the hashrate by 60% in 2024, comfortably outpacing global hashrate growth. 

Cleanspark mined 650 BTC in February, and its digital asset treasury now sits at $260 million. The company has invested in improving the hashrate and operational efficiencies as it prepares for the halving event and the positive impact of the “supply shock,” which has historically translated to higher Bitcoin prices. 

What Is the Target Price for CLSK Stock?

Analysts expect Cleanspark to end fiscal 2024 with earnings of $0.75 per share, compared to a loss of $1.33 per share in 2023. Its earnings are forecast to expand to $1.37 per share in 2025. Comparatively, analysts expect revenue to more than double to $432 million in 2024 and surge to $826 million in 2025. 

Out of the six analysts covering CLSK stock, five recommend “strong buy” and one recommends “hold.” The mean target price for CLSK is $18.87, which is lower than current prices. However, the stock has a high target price of $27, indicating an upside potential of more than 19% from here.

On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.