Hut 8 Mining Corp (HUT) is a cryptocurrency mining firm with industrial-scale bitcoin mining operations in Canada. It supplies traders with direct publicity to bitcoin with out the technical complexity or constraints of buying the underlying cryptocurrency.
It’s within the enterprise of using specialised tools to unravel complicated computational issues to validate transactions on the bitcoin blockchain. The corporate receives bitcoin in return for the industrial exercise of bitcoin mining.
I’m bearish on HUT inventory contemplating its good points of about 180% in 2021 are usually not totally justified by working and monetary efficiency, and bitcoin volatility is including one other extremely unpredictable danger. Crypto stocks have a number of dangers as we transfer into 2022, with the regulatory framework being on high.
Hut 8 Mining Enterprise Information
Early this month, the digital asset miner introduced a sequence of ESG targets for a extra sustainable future. “Expertise, sustainability, inclusivity, and innovation are a part of our DNA at Hut 8, and we’re proud to steer constructive change in our sector, which we hope will construct a legacy that our group and shareholders may be pleased with,” mentioned Jaime Leverton, Chief Govt Officer of Hut 8.
Amongst high targets, the corporate is specializing in methods to attain carbon neutrality for scope 1 & 2 GHG emissions by 2025, scale back emissions by means of technological and operational innovation, and preserve an govt administration group gender range of over 40% girls, plus a board gender range illustration of over 30% girls.
The newest manufacturing replace for November 2021 reported that 265 bitcoins have been mined, a mean manufacturing fee of 8.83 bitcoin per day, and a complete bitcoin steadiness held in reserve of 5,242 as of November 30, 2021.
The corporate said that “Our NVIDIA CMP deployment is contributing income of roughly $140,000 per day, primarily based upon present mining economics,” mentioned Jason Zaluski, Head of Expertise for Hut 8. “Given the low energy depth of those chips, our value per bitcoin of roughly $3,000 means we’re reaching unit margins in extra of 95%.”
I’ll analyze this within the dangers part.
Q3 Earnings 2021: Document Quarterly Income
Hut 8 Mining reported a 3rd consecutive file quarterly income. The corporate reported income of $50.3 million CAD in comparison with $5.8 million within the prior-year interval, 905 bitcoins mined, and EPS GAAP of $0.12 (a beat by $0.02). As anticipated HUT stock earnings have been very unstable previously quarters.
Financials: Sturdy, however Rising Prices and Inventory Dilution are Principal Issues
Hut 8 Mining has very sturdy financials with no long-term debt as per the newest quarter and solely $9.6 million in short-term debt. The corporate reported money & money equivalents of $223 million on its steadiness sheet in Q3 2021. Once more, these are in Canadian {dollars}.
I’m skeptical concerning the assertion talked about earlier than about value per bitcoin of roughly $3,000 and unit margins of greater than 95%. Bitcoin mining is a aggressive business with skinny revenue margins, and the profitability is pushed by the worth of bitcoin, electrical energy, and the superior pc {hardware} used.
I see an unstable profitability development in 2021. The corporate had a internet loss in Q2 2021 and website working prices that elevated considerably in Q3 2021 as the corporate elevated its energy consumption due to the next hash fee.
Additionally, there was an providing of widespread shares on September 17, with gross proceeds of $220 million (US$173 million). These are detrimental components that make it arduous to maintain its 2021 inventory value rally.
Hut 8 Mining has one other detrimental issue to face: a money burn downside all through the previous 5 consecutive quarters and the primary 9 months of 2021. Ought to bitcoin’s value tumble in 2022, HUT inventory might face intense promoting strain.
Wall Road’s Take
Hut 8 Mining has a Sturdy Purchase consensus score primarily based on 4 Buys assigned previously three months. The common Hut 8 Mining analyst forecast of $ $18.51 implies 139.6% upside potential.
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Disclosure: On the time of publication, Stavros Georgiadis, CFA didn’t have a place in any of the securities talked about on this article.
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