The end goal of investing is profit, and few investments have shown the long-term profit of bitcoin. Yes, the true story in cryptocurrency is its extreme volatility, but the underlying fact is simple: investors who bought into bitcoin five years ago, and held on, have tripled their money. Even this past January, BTC surged 40%.
But buying bitcoin isn’t the only way to cash in on it, there are also the bitcoin mining stocks. These are firms, generally small, that own large-scale server rigs capable of computing the blockchain links – and creating new bitcoins. In fact, according to H.C. Wainwright analyst Mike Colonnese, “the median return for publicly traded BTC miners was 124% in January, more than 3x the performance of BTC.”
Elaborating further on the opportunity, Colonnese writes: “We expect improved mining economics, driven by higher BTC prices and moderating energy costs (partially offset by rising network difficulty) to drive upward estimate revisions for the group throughout 2023 and see continued multiple expansion for mining stocks. As such, it is plausible the miners could continue outperforming BTC, in our view…”
Of course, Colonnese doesn’t deny the risks inherent in this path – he notes that bitcoin mining stocks will be sensitive to negative macro-data – but he makes a compelling case that the positives justify the risks.
Keeping that in mind, we’ve opened up the TipRanks database and pulled the details on two small bitcoin mining stocks that Colonnese sees as potential winners in 2023. For investors interested in betting on the blockchain, these should present some interesting paths forward.
Cipher Mining Inc. (CIFR)
The first company we’ll look at is Cipher Mining, a US-based bitcoin miner that is still in the early stages of its ramp-up. The company has three active mining sites, and is working both to expand its existing exahash capacity and to develop new mining sites. The company is currently generating bitcoin at a rate of approximately 1.4 EH/s.
Cipher’s chief mining facility, Odessa, operates on up to 207 megawatts of power, and its mining operations came online this past November. Odessa is supplemented by two additional sites, Alborz, a 40 megawatt, wind-powered mining facility, and Bear and Chief, a site which was completed in October of last year and can operate at up to 20 megawatts.
All three of these sites are boosting their bitcoin production capabilities. Per Cipher’s 3Q22 report, the last released, the company generated 196 bitcoin in that quarter. The fourth quarter report won’t be out until March, but we do have the December and January monthly production updates available.
In December, Cipher mined 225 bitcoin, and in January, the company mined another 343. In each of those months, the company’s bitcoin generation exceeded all of 3Q22 by a wide margin, and its generation rate is accelerating. As of the end of January, Cipher listed 424 bitcoin held as assets, 41,000 mining rigs deployed in its data centers, and a 4.3 exahash-per-second operating rate.
Casting his eye on this bitcoin miner, H.C. Wainwright’s Colonnese writes: “We are upgrading shares of CIFR to Buy from Neutral on strong execution, best-in-class mining economics, and improved sentiment for BTC… Cipher now has the sixth-largest hashing capacity of all publicly traded BTC miners in North America, and we estimate the company is capable of producing ~14.5 BTC per day. This equates to over $330,000 in daily mining revenues when applying current BTC prices of $23,000, a substantial increase over the ~$50,000 in daily revenues the company generated in October 2022. We applaud management’s ability to rapidly scale the company’s mining operations over the span of just a few months…”
Along with his new Buy rating on the stock, Colonnese includes a price target of $3, suggesting a 12-month upside potential of 76%. (To watch Colonnese’s track record, click here)
This is the only analyst review on file for Cipher, which is currently trading for $1.70. (See CIFR stock forecast)
Hive Blockchain Technologies (HIVE)
Next up is Hive Blockchain, a Vancouver, Canada-based company with bitcoin mining operations in its home country as well as in Sweden and Iceland. Hive Blockchain boasts that it operates its mining facilities, which take up to 50 megawatts of power, on 100% renewable energy sources.
Those mining operations are extensive. As of the end of January this year, Hive Blockchain was operating at an exahash rate of 2.68 EH/s. The company has been deploying new mining server rigs in large numbers over recent months, significantly boosting its capacity.
Indeed, the December and January monthly updates show that Hive’s capacity has been growing. The company mined 213.8 bitcoin in December, and another 260 in January. Month-over-month, the company’s mining operations generated a 22% increase in bitcoin.
Hive has committed to a policy of ‘hold on for dear life,’ or HODL; that is, keeping a large reserve of bitcoin to hold for the long-term. Under its HODL policy, Hive had holdings totaling 2,430 bitcoin at the end of January, worth over $56 million in US currency at current prices.
H.C. Wainwright’s Colonnese is impressed with Hive’s execution, writing: “Hive consistently ranks in the top 3 publicly traded BTC miners when it comes to efficiency as measured by BTC mined relative to the company’s active hash rate, which we attribute to above average uptime from both stable electricity sources and optimized proprietary software. In 2022, Hive produced 20% more BTC per EH of capacity than its peers, a significant competitive advantage, in our view, and a demonstration of Hive’s operational prowess.”
“While the stock has rallied [150%] YTD, alongside the rebound in BTC prices, we see additional share price appreciation driven by hash rate expansion and efficiency gains, as well as improved sentiment for BTC throughout 2023,” the analyst summed up.
In-line with this stance, Colonnese rates the stock as a Buy, with a $5 price target to indicate its potential for ~39% share appreciation this year.
This small-cap bitcoin miner has slipped under the radar a bit, and only has 2 recent analyst reviews. They both agree, however, that it’s a stock to buy, making the Moderate Buy analyst consensus unanimous. The shares are selling for $3.60 and their $6 average target indicates room for ~67% upside over the next 12 months. (See Hive stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.