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On Wednesday, Cantor Fitzgerald adjusted its outlook on Iris Energy Ltd. (NASDAQ: NASDAQ:IREN), raising the price target to $23 from $20, while maintaining an Overweight rating. The firm highlighted the company's recent decision to expand its Bitcoin mining operations, which is expected to increase its hash rate significantly.
Iris Energy, which released its October monthly operational report on November 6, has seen an uptick in Bitcoin prices and hash price, making its Bitcoin mining business more profitable. The company has chosen to allocate 300 of the remaining 400 megawatts (MW) at its Childress facility to Bitcoin mining. This expansion is projected to boost Iris Energy's total hash rate to 50 EH/s by June.
Despite focusing on Bitcoin mining, Iris Energy is still open to co-location deals. Management mentioned during a call that a "trillion-dollar hyperscaler" expressed interest in their 1.4 gigawatt (GW) site, which was detailed for the first time. The firm believes Iris Energy offers a dual advantage as it is poised to become a top Bitcoin miner by hash rate while also having the potential to unlock significant equity value with its Sweetwater site.
Management also discussed the possibility of returning capital to shareholders by 2025, with the notion of a Bitcoin dividend being considered. However, the primary use of capital is expected to be on capital expenditures (capex), with an estimated $500 million needed to reach the 50 EH/s target and potentially $1 billion for the Sweetwater site's development.
Cantor Fitzgerald's analysis suggests that Iris Energy's risk/reward profile is favorable, considering the upside in Bitcoin mining and the potential in AI/High-Performance Computing (HPC). The firm's valuation of Iris Energy is lower on an enterprise value (less Bitcoin)/hash rate multiple compared to other pure-play Bitcoin miners, even though Iris Energy is likely to become the lowest cost miner in their coverage by the end of the year.
In other recent news, iRen has reported a strong first quarter of the fiscal year 2025, underpinned by significant growth in Bitcoin mining and AI cloud services. The company is expanding its Bitcoin mining operations to 50 exahash in the first half of 2025 while maintaining a low-cost operation. Financial highlights of the quarter include an adjusted EBITDA of CAD 2.6 million, Bitcoin mining revenue of CAD 54.3 million, and AI cloud services revenue of $3.2 million.
iRen is also exploring alternative funding instruments and considering investor distributions in 2025. The company has secured a 1.4 Gigawatt Sweetwater Data Center project in West Texas and expanded its land holdings to over 1,300 acres. Among these recent developments, iRen is also transitioning to a US domestic issuer with US GAAP reporting, indicating a potential inclusion in the Russell 2000 index.
The company's co-founder and co-CEO, Daniel Roberts, emphasized iRen's position as a low-cost commodity producer focused on returns for investors. iRen's strategic developments also include the commissioning of NVIDIA (NASDAQ:NVDA) H200 GPUs at its Prince George data center, supporting significant potential hardware profits, and the acceleration of a utility substation for its Texas data center, expected to be energized by April 2026. These developments highlight a strong start to FY 2025 for iRen, with a clear focus on expansion and sustainability in its operations.
InvestingPro Insights
Iris Energy's strategic expansion in Bitcoin mining aligns with its impressive financial metrics. According to InvestingPro data, the company has shown remarkable revenue growth of 149.98% in the last twelve months as of Q4 2024, with a strong gross profit margin of 88.24%. This robust performance supports Cantor Fitzgerald's optimistic outlook on the company's future.
InvestingPro Tips highlight that Iris Energy holds more cash than debt on its balance sheet, which could provide the financial flexibility needed for its ambitious expansion plans. Additionally, the company's stock has demonstrated a strong return over the last year, with a price total return of 151.58% as of the latest data.
However, investors should note that Iris Energy is not currently profitable and is quickly burning through cash, as pointed out by InvestingPro Tips. This aligns with the company's focus on capital expenditures for growth rather than immediate profitability or shareholder returns.
For those interested in a deeper analysis, InvestingPro offers 11 additional tips for Iris Energy, providing a more comprehensive view of the company's financial health and market position.
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