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On Friday, H.C. Wainwright maintained a Buy rating on Digihost Technology (NASDAQ:DGHI) with a price target of $2.50. The firm highlighted Digihost's strategic shift towards hosting and collocation services, as evidenced by its second-quarter performance. Despite a decline in revenues to $9.2 million in the second quarter of 2024 from $13.0 million in the first quarter, the company surpassed the analyst's expectations of $8.1 million. This was attributed to the impact of the April halving event on the company's operations.
Digihost's transition is marked by a decrease in self-mining revenue to $3.0 million in the second quarter, down from $6.8 million, while revenue from collocation and energy sales rose to $6.3 million from $6.1 million. The company has set an ambitious target to reach a total hashing power of 6Eh/s by the end of the year, a significant increase from 2.75Eh/s at the end of the second quarter and 2.1Eh/s at the end of the first quarter.
The growth strategy includes ongoing investments in infrastructure and the integration of next-generation mining equipment. Notably, Digihost is not expected to purchase additional mining equipment but will rather build out its fleet through partnerships. An example is the July 11, 2024, announcement of a profit-sharing agreement to integrate 11,000 S21 miners, adding approximately 2.2Eh/s of hashing power.
Digihost's operational capacity is supported by its approximately 103MW of power from its sites in upstate New York and Alabama, with an additional 200MW undeveloped in North Carolina. However, the company's natural gas-fired power plant in North Tonawanda, which has a 63MW capacity and became fully operational at the end of 2023, is facing regulatory challenges due to a New York State moratorium on new or expanded proof-of-work cryptocurrency mining operations that use carbon-based energy sources.
InvestingPro Insights
Recent data from InvestingPro shows that Digihost Technology (NASDAQ:DGHI) has undergone significant growth in revenue, with a notable increase of 97.65% in the last twelve months as of Q2 2024. This aligns with the company's strategic shift towards hosting and collocation services and reflects the impact of new partnerships and infrastructure investments. Despite the impressive revenue growth, Digihost faces challenges, as indicated by a negative P/E ratio of -3.69 and an adjusted P/E ratio of -4.92, which suggests that the company is not currently profitable.
InvestingPro Tips for Digihost highlight the volatility in stock price movements and the fact that short-term obligations exceed liquid assets, pointing to potential liquidity risks. Moreover, the company does not pay a dividend, which may be a consideration for income-focused investors. For those considering an investment in Digihost, it's worth noting that there are additional insights available on InvestingPro, with a total of 7 tips that can further guide your investment decisions.
With a market capitalization of $40.21 million and an analyst target fair value of $2.50, Digihost is trading below this target at a previous close price of $1.19. The InvestingPro fair value estimate stands at $1.64, suggesting some potential upside from the current trading price. As the company continues its growth strategy and navigates regulatory challenges, these metrics and insights from InvestingPro provide a comprehensive view of Digihost's financial health and market position.
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