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Investing.com -- JP Morgan revised its outlook for bitcoin mining companies, following their fourth-quarter results and changes in the cryptocurrency market. Brokerage upgraded IREN Ltd (NASDAQ:IREN) to "Overweight" from "Neutral," citing strong mining operations and potential for expansion into high-performance computing. Whereas, Cipher (NASDAQ:CIFR) was downgraded to "Neutral" from "Overweight."
JPM maintained its "Overweight" ratings on Riot Platforms (NASDAQ:RIOT) and CleanSpark (NASDAQ:CLSK) and kept Marathon Digital (NASDAQ:MARA) at "Neutral."
JP Morgan sees IREN as an appealing investment due to its significant stock decline this year and potential upside of around 70%, which could increase if the company secures an high-performance computing deal with a well-known client.
While Cipher’s downgrade was based on its limited upside potential compared to peers.
The bank lowered its price targets for major miners by 19%-29% due to a drop in its bitcoin price estimate and an expected surge in network computing power.
The five bitcoin miners under JP Morgan’s coverage have collectively lost more than 20% of their market value in 2024, compared to an 11% drop in bitcoin’s price.
The decline followed a rally around the U.S. election, with miners particularly affected by slower-than-expected high-performance computing deals and deteriorating mining economics.
Despite this, JP Morgan sees an attractive entry point for patient investors, especially those interested in exposure to data center expansion through bitcoin miners.
JPMorgan’s valuation framework for miners considers three key factors: mining operations, land and power assets, and bitcoin holdings.
The bank also attributed reduced price targets on a 10% cut in its assumed bitcoin price and an 80% increase in annual network hashrate growth projections.
Network hashrate, an indicator of mining difficulty, would grow by 200 exahashes per second (EH/s) annually, a slowdown from the past two years but still significant, as per JPM.
JP Morgan also adjusted its valuation of miners’ bitcoin holdings. While MicroStrategy, known for its bitcoin accumulation strategy, has historically traded at a premium of around 2.0 times the notional value of its bitcoin holdings, the bank trimmed its valuation premium for bitcoin miners to 1.5 times.