Ever since they came on the scene, cryptocurrencies have sparked the imaginations of online traders, speculators and accountants alike. The leading digital currency, Bitcoin, is currently trading at approximately $26,550 per coin, representing an increase of ~60%. And Bitcoin looks set to see strong upward pressure on that price next year.
Bitcoin’s algorithm has a built-in halving mechanism, whereby the reward miners receive for solving a blockchain link is halved. The process takes place every four years and the next one is expected in May 2024. Bitcoin halvings have occurred regularly since 2012, and have historically had a positive impact on the digital currency’s value as well as bitcoin’s stock price. Related stocks.
This last gives investors an opportunity to get in early. The predictability and regularity of the Bitcoin halving makes now the perfect time to start watching bitcoin stocks, to find an attractive entry point before this trigger occurs. Wall Street analysts can help with this; They have been pointing to strong picks among bitcoin mining companies, anticipating a price hike.
A quick look TipRanks Data shows that their latest picks have many common features that should bring in investors. We look at two bitcoin mining stocks that are each currently priced below $5 per share and have a consensus rating of ‘Strong Buy’. Additionally, some are projecting triple-digit upside potential for next year. Here are the details.
We will start with Bitfarms, a bitcoin mining company headquartered in Toronto, Ontario, and with 11 bitcoin mining sites – farms – as the company calls them – in 4 countries. The company has around 56,200 miners deployed. Bitfarms boasts a hashrate of 5.6 EH/s, and generates an average of 12.4 bitcoins per day.
Bitcoin mining does not happen without power, and Bitcoin miners operate the large-scale power generation facilities required to support their data center operations. Bitfarms plans to generate 240 megawatts of power, and last August, the company announced plans to deploy 50 megawatts of hydroelectric power in Paraguay. The scheme is the first phase of a 150 MW hydropower development contract package. The current phase is located adjacent to Bitfarms existing Paraguay facility and is expected to go online in 1Q24.
Bitfarms is also expanding its Argentine operations. The company has added 3,150 state-of-the-art mining rigs at its Rio Cuarto facility and plans for 1,068 additional shipments scheduled for installation this month.
Bitfarms’ efforts to expand its power generation and farming network is paying off. According to the company’s 2Q23 financial report, the company issued 1,223 bitcoins per quarter, and Hashrate as of June 30 was up 10% from Q1 and stood at 5.3 EH/s. That hashrate alone shows one measure of the company’s expansion – two months later, in August, the hashrate was up to 5.6 EH/s. The company is targeting a hashrate of 7.0 EH/s in the first quarter of next year.
In a recent August production number, Bitfarms reported mining 383 bitcoins during the month. This is up from 378 miners in July, although down from 534 bitcoins created in August last year. The figure of 383 was in line with Bitfarms’ monthly production for the first 8 months of this year – and the year-to-date total of 3,281 bitcoins was higher than the same figure of 3,252 last year. Bitfarms sold 323 of the bitcoins produced in August, generating a total of $9 million in revenue. The remaining 60 bitcoins were added to the company’s treasury, bringing it up to 654 bitcoins. Bitfarms valued this holding at $17.8 million based on August 31 prices.
According to Cantor Fitzgerald analyst Josh Sigler, BitFarms has a lot of strength heading into next year, which investors may be overlooking right now. He wrote, “We continue to believe that the BitFarms story may be undervalued by investors. The company has made great strides in establishing a clear line of sight on recent growth and improving its cash flow. With a strong balance sheet and increased visibility to Argentina’s revitalization, we believe BITF is getting an unfair discount on its valuation relative to its peers. If BitFarms achieves its near-term hash target… while demonstrating improved free cash flow and unit economics, we believe there could be a significant upside to the stock price.
A significant upside, in fact. With an Overweight (Buy) rating on the shares, Seglar’s $3 price target indicates a 168% upside potential for the next 12 months. (To look at Sigler’s track record, Click here.)
The path seems to be in consensus, with all 3 recent analyst opinions positive, with a unanimous Strong Buy consensus rating. The stock is currently priced at $1.12, and the average price target of $3.67 is more bullish than Sigler’s, suggesting a 228% gain over the next year. (look out Bitfarms stock forecast.)
Sipper Mineral (CIFR)
Next is sipper mining, a growing concern in the bitcoin mining industry. Cipher, which went online in November last year, is an American company in the process of building its main mining facility in Odessa, Texas. The facility is scheduled to be completed by the end of this quarter, bringing Cipher’s total bitcoin mining hashrate to 7.2 EH/s. The company reported a total hashrate of 6.8 EH/s at the end of 2Q23.
Cipher has two additional mines in Alborz, Texas and Bear and Main, Texas, both of which are wind powered. These sites can operate at 40 and 20 MW respectively. Among the three active sites, the company has deployed 68,000 miners, and at the end of August this year, it had the capacity to produce up to 16.1 bitcoins per day.
In the company’s latest product update, Cipher reported that it had mined a total of 357 bitcoins this year in August. This decreased by 15% per month, and after selling 355 bitcoins, the company had an account balance of 519 bitcoins. At an estimated value of $27,000 per bitcoin, this holding is over $14 million. Sipper management reports that the company is on track to meet its current expansion and production goals.
While Cipher’s core business is bitcoin mining, the company is also building its power generation capabilities — something that has caught the attention of BTIG analyst Gregory Lewis. He sees the company’s ability to leverage its success in entering into low-cost electricity contracts as a clear advantage, and says, “The company has a very low-cost fixed-price power purchase agreement at ~$0.027/kWh (expires in 2027) for electricity.” The ability to sell tokens to the grid. Cipher has one of the lowest cost structures in the BTC mining industry, creating attractive unit economics that allows the business to operate in cycles. In the near term, Cipher’s core business should be mining BTC, but in the longer term it will be more integrated into the power generation space. We see an opportunity to be a player.
Taking this forward, Lewis has set a Buy rating on CIFR, and the $6 price target suggests a 124% gain for the year. (To look at Lewis’ track record, Click here.)
The analyst consensus view on Cipher is one, a strong buy based on 6 positive ratings over the past 3 months. The stock has an average price target of $5.25, representing a 96% upside from the current share price of $2.68. (look out Sipper stock forecast.)
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Disclaimer: The opinions expressed in this article are those of the featured analysts only. The content is intended for informational purposes only. It is very important to do your own analysis before making any investment.