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On Friday, Rosenblatt Securities initiated coverage on Hut 8 Mining Corp. (NASDAQ:HUT) with a Buy rating and a price target of $23.00. The research firm’s analysts pointed to the merger with US Bitcoin as a key driver for shareholder value. Trading at a P/E ratio of 3.7x and showing a "GOOD" financial health score according to InvestingPro, the company appears positioned for growth. The integration process, which experienced some restructuring challenges in its first year, is expected to transition into a growth phase starting in 2025.
Analysts at Rosenblatt believe that Hut 8 Mining’s multiple revenue streams will begin to ramp up as soon as the first quarter of 2025, with high-margin High-Performance Computing (HPC) operations anticipated to be operational before the end of the year. The stock has indeed shown strong performance, delivering a 73.7% return over the past year. Despite Hut 8 Mining’s shares outperforming recently, Rosenblatt suggests the stock remains undervalued, a view supported by InvestingPro’s Fair Value analysis.
The firm acknowledges that the stock’s multiple may seem stretched due to recent top-line pressure, but they argue that the market is not fully appreciating the potential of the HPC and US Bitcoin opportunities. Moreover, Rosenblatt has confidence in the management team’s ability to deliver on their strategic plans.
The price target of $23.00 is based on a 7.8x multiple of the firm’s 2026 Adjusted EBITDA estimate, compared to a peer average of 5.7x. Rosenblatt’s analysts justify the premium valuation for Hut 8 Mining due to their expectation that the company will enter the higher-multiple HPC business, which they believe will significantly benefit the company’s financial performance.
In other recent news, Hut 8 Mining Corp reported strong financial results for Q4 2023, with revenue rising 69% year-over-year to $162.4 million. The company’s net income also saw a substantial increase, reaching $331.4 million compared to $21.9 million in the previous year. Analysts from Benchmark maintained their Buy rating for Hut 8, setting a price target of $41, reflecting confidence in the company’s strategic direction and growth potential. H.C. Wainwright also upheld its Buy rating with a $30 target, citing the company’s potential AI and high-performance computing (HPC) deals as significant growth drivers. During an earnings call, Hut 8’s management highlighted ongoing development projects for AI data centers, including the Riverbend project in Louisiana, which could generate approximately $250 million in annual HPC/AI-related revenues. The company is in discussions to secure significant contracts, which could further enhance its revenue streams. Institutional ownership of Hut 8 has increased significantly, rising from 12% to 55%, indicating growing investor confidence in its future prospects.
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