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CleanSpark: The Most Overlooked Bitcoin Mining Stock (NASDAQ: CLSK)

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In today’s stock market, many companies are being crushed and bitcoin miners are no exception. However, when considering that CleanSpark (Nasdaq: CLSK) is profitable, its business is growing fast, its share price is already down 83% from its January 2021 high, and I think the risk/reward opportunity is starting to look promising for long-term investors wanting to get into the bitcoin mining industry.

CLSK الأسهم stock chart

CLSK stock chart (TradingView)

Renewable energy and profitability

The key to success in the world of bitcoin mining is to have cheap energy. But with the climate Fears Raised by Elon Musk of Tesla (TSLA) and other ESG investors such as Larry Fink of BlackRock (BLK), a Bitcoin miner must also get the majority of its energy from renewable sources to attract institutional capital. Fortunately for CleanSpark, they have access to both clean and cheap energy.

Leveraging their more than three decades of energy technology expertise and using an inexpensive power supply that contains mostly nuclear, electric, solar and wind power, it costs CleanSpark just $4,500 in energy to mine a single bitcoin. This is well below the $28,957.79-$68,906.48 range that bitcoin has been trading in over the past 52 weeks. But, even if Bitcoin trades at a 52-week low, CleanSpark will still reap some interesting spreads. In fact, when factoring in total operating costs, they report a gross margin for the first quarter of 2022 of 79%. With CleanSpark’s stock price down more than 83% since the euphoria of Bitcoin in 2021, investors should take a serious look at the bull situation for this Bitcoin miner.

BTC stock chart

Bitcoin Stock Chart (TradingView)

Undervalued on a new scale

Bitcoin mining is an emerging industry. And while traditional valuation models and metrics must be used to measure the investment thesis of Bitcoin miners, new valuation methods must be adopted to analyze this new asset class. One such metric that I think is relevant to valuing a bitcoin miner is the hash to market capitalization (H/M) ratio. This ratio shows how much bitcoin mining power a company has for each value of capital invested.

For starters, Hashrate refers to the total combined computational power used to mine and process transactions on the Proof of Work blockchain. CleanSpark’s hash rate of 2,300 petah/sec means they perform 2,300 quadrillion calculations in one second, giving them a leading edge when solving the complex computational problems needed to create a block and earn a bitcoin mining reward.

From now on, CleanSpark’s remarkable hash rate and relatively low market capitalization of $269 million give them the most attractive hash/market capitalization ratio among the top publicly traded bitcoin miners. These companies include Bitfarms (BITF), Core Scientific (CORZ), Hut 8 Mining (HUT), Riot Blockchain (RIOT), Hive Blockchain Technologies (HIVE), and Marathon Digital Holdings (MARA).

According to recent Bitcoin mining data, CleanSpark’s hash rate of 2,300 petahash/s (PH/S) and a market capitalization of $269 million produces an H/M ratio of 8.55 PH/S. With a ~48% lower result at 4.44 PH/S The second highest H/M ratio for bitcoin mining goes to Bitfarms and Core Scientific. While some publicly traded Bitcoin miners have much more mining power, when market caps are normalized, CLSK obviously provides the best bang for the buck. Simply put, CleanSpark’s ability to mine bitcoin has been overlooked by the market and underestimated its true value when compared to its peers.

Hashrates to Market Cap Ratio of Major Bitcoin Miners
May 2, 2022 CLSK BITF kors hut riot Beehive Mara
Hashrate (PH/S) 2300 2700 8300 2540 4300 2000 3900
Market value (in millions) 269 607.78 1869 620 1189 617.7 1608
Hashrate / Market Cap 8.55 4.44 4.44 4.10 3.62 3.24 2.43
Created by Austin Sonner using data from the Hashrate Index

Hash rate graph of market capitalization ratios

Created by Austin Sonner using data from the Hashrate Index

growth

CleanSpark’s revenue is growing rapidly, its finances are improving, and it is developing very beneficial strategic partnerships. Total revenue for the first quarter of 2022 increased nearly 1700% year over year, from $2 million to $41 million, as it significantly boosted bitcoin mining operations. CLSK’s net income turned positive from a loss of $7 million in the first quarter of 2021 to an increase of $14.5 million in the first quarter of 2022.

CleanSpark is also expanding through strategic partnerships. Their recent partnership with Lancium, the Texas-based energy technology and infrastructure company, secured access to 200 MW of data centers powered by renewable energy from Lancium with the option to add an additional 300 MW of capacity in the future. Management expects this strategic partnership to increase the hash rate by 400%, which is doubling the entire prior year guidance for 2022.

CleanSpark’s growth is being observed via Wallstreet. Financial Times It ranked it as the 44th fastest growing in North, Central and South America when ranked by revenue growth. CleanSpark’s impressive implementation is starting to gain attention. But despite the hype caused by CLSK, the fear, uncertainty and uncertainty surrounding the cryptocurrency’s future still plagued institutions and many retail investors largely on the sidelines. As they wait to see how bitcoin miners will perform against the current bearish bitcoin and stocks, I think this is a potential entry point for bold investors with a three to five year timeline.

HODL استراتيجية strategy

CleanSpark Mines, or mints, 9.9 bitcoins a day. While they are strategically selling some mined bitcoins at a profitable price, Chief Financial Officer Gary Vicchiarelli says they expect their bitcoin holdings to gradually increase over time due to the high potential for a significant bitcoin price appreciation. Furthermore, CleanSpark’s Bitcoin stack increases its selection. By keeping the Bitcoin you’re mining and not just selling it, management can extract more value for each Bitcoin by potentially borrowing against it to fund operations or earn a return on it, usually in the 3-8% range.

Their Bitcoin cache boosts their balance sheet and gives them a price that attracts attention at a book value (P/BV) of 0.68. The market is essentially valuing CleanSpark at 32% off the value of its assets. According to this metric, CleanSpark is less expensive compared to its publicly traded counterparts such as Marathon Digital Holdings, Hut 8 Mining and Riot Blockchain which trade at P/BV of 2.35, 1.35 and 0.87, respectively. CleanSpark, despite growing 1,700% year-over-year, has a much lower P/BV than many traditional value stocks, such as JPMorgan (JPM) and Berkshire Hathaway (BRK.B), which posted annual growth of just 4.43 % and 12.46%, respectively. At 1.58 and 1.41, respectively, the profit/value-added multiples are more than twice that of CleanSpark.

To add some icing on the cake, CleanSpark has no long-term debt and in Q1 2022 earnings call management indicates that it will not issue any shares while its shares continue to trade at a significant discount to its peers.

P/BV . chart

Price to Book Value (P/BV) for Bitcoin Miners (Alpha Search)

More than just a bitcoin mining company

Founded in 1987, CleanSpark’s over three decades of energy technology innovation and intellectual property give them a diversified revenue stream and an advantage over new startups in the bitcoin mining space. It is important to note that 10% of CleanSpark’s revenue is generated by non-Bitcoin companies that add weight to their financial statements during Bitcoin boom and bust cycles.

Its non-bitcoin segment, which consists of CleanSpark’s smart energy hardware, software, and services, saw revenue increase 1,333% year-over-year. I don’t expect this growth to end anytime soon. In fact, the IEA expects investment in this sector to more than double in the next four to eight years as the global economy drives net net carbon emissions. For the foreseeable future, I believe that CleanSpark’s energy business will continue to gain more market share in the expanding smart energy market, adding an edge to our strong investment case.

Network investment prospects

International Energy Agency

company culture

When analyzing the investment bull situation of a company, it is important to check the company’s culture. I would love to see that CleanSpark invests in its employees by increasing employee compensation in order to attract the best talent. At their Nevada mining facility, they have upgraded their entry-level operations starting with payouts to $19 an hour and offering employer-paid health insurance and generous paid time off. For comparison, the minimum wage in Nevada is $9.75. CleanSpark goes so far as to invest in its employees by nearly doubling the minimum compensation rate required in the state.

On the other hand, I’m concerned about the lack of diversity in CleanSpark’s leadership. In fact, their executive team consists entirely of white males. In addition, every member of its board of directors is male. To provide a more comprehensive business perspective for the company, I’d like to see CLSK add women and people of color to its executive team and board of directors.

bottom line

CleanSpark and other Bitcoin miners usually have a higher beta, and volatility, than Bitcoin and the stock market in general. If bitcoin drops from here to retest its summer 2021 lows at $29,000, you can almost certainly expect CleanSpark price to follow suit in a potentially more violent fashion. For this reason, unless investors believe in a long-term rise in the price of Bitcoin, they should stay away from CleanSpark. Potential shareholders should also track CleanSpark’s alarmingly low quick ratio of 0.49, which indicates they can only pay off half of their current liabilities with their short-term liquid assets.

All that said, CleanSpark’s decades of experience in the energy technology sector, best-in-class segmentation for a given market cap, 1700% revenue growth year-over-year, improved net income, lower price/book, and strategic bitcoin reserves, helps successful companies that don’t It counts on Bitcoin to make this $269 million company one of the most overlooked Bitcoin mining companies today.

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