Wainwright maintains Buy on Digi Power X with $2.50 target

On Monday, H.C. Wainwright reaffirmed its Buy rating on Digi Power X Inc (NASDAQ:DGXX) with a steady price target of $2.50. The endorsement comes after Digi Power X, previously known as Digihost, disclosed a preliminary report for the March quarter, projecting revenues around $12.1 million. This figure is primarily attributed to hosting services, complemented by $3 million from energy sales. Currently trading at $1.06, the stock has experienced significant volatility, falling 29% year-to-date. InvestingPro analysis suggests the stock is currently undervalued, though investors should note its high price volatility.

The company’s revenue for the last year reached $37.0 million, marking a 42% increase from the $26.1 million reported in 2023. The shift in Digi Power X’s business strategy towards hosting, rather than self-mining, appears to be driving this growth. In 2024, self-mining revenue dropped to zero, down from $10.3 million the previous year. However, this decline was more than compensated for by co-location services, which surged to $35.1 million from $15.8 million in 2023. InvestingPro data reveals the company faces challenges with weak gross profit margins of 11.6% and negative EBITDA of $2.14 million in the last twelve months.

Further discussions with senior management towards the end of last week have shed light on Digi Power X’s future direction. The company’s narrative remains largely unchanged from last year, with plans to expand its power capacity. Currently, Digi Power X operates approximately 100MW across three sites, including 60MW at North Tonawanda, 18MW in Buffalo, and 22MW in Alabama. There are also opportunities to access up to 200MW at a new site in North Carolina, along with expansions at existing facilities.

The company’s development strategy includes enlarging the Alabama site to accommodate High-Performance Computing (HPC) in collaboration with a potential customer, potentially through a joint venture or partnership. Following the completion of the approval and permitting process, construction on the site could commence once an agreement is in place.

With the prospect of increased power capacity to enhance Digi Power X’s operations, H.C. Wainwright reiterated its confidence in the company’s stock with a Buy rating and a $2.50 price target.

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