Crypto stock Luxxfolio gets target cut by PI Financial

The “Buy” rating stays on cryptocurrency miner Luxxfolio Holdings (Luxxfolio Holdings Stock Quote, Charts, News, Analysts, Financials CSE:LUXX) but PI Financial analyst Kris Thompson has taken a bite out of the target price in a Wednesday research report, dropping it from $1.20 to $0.40 for a projected one-year return at the time of publication of 73.9 per cent.

Vancouver-based Luxxfolio, which is a digital asset company with mining operations in the US, reported fiscal second quarter 2022 financials last week for the period ended February 28, showing revenue of $3.8 million, which was down from $4.4 million for the fiscal first quarter. The drop was a result of the lower bitcoin price along with a higher global hashrate and a lower than scheduled average number of miners installed, with supply chain and global delivery congestion figuring into the installation numbers. Thompson said he was expecting revenue at $5.3 million. On EBITDA, Luxxfolio’s Q2 was at $1.4 million, down from $3.1 million a quarter earlier.

On the quarter, Thompson said, “Opex was also higher than expected from higher G&A (travel, shipping costs, etc.) and consulting fees presumably related to strategic growth opportunities (e.g., sourcing more power, immersion cooling).”

On Luxxfolio’s hashrate, a measure of the computational power used to mine a given currency, the company ended the Q2 with a hashrate of 139 PH/s, which it says has since been increased to 170 PH/s at the end of March. Luxxfolio said it mined 20.07 bitcoin in March and had bitcoin-equivalent reserves at the end of the month of 62.6, composed of 60.7 BTC and 26.5 ETH). 

“We will continue to see site PH increase rapidly over the coming months as new miners arrive at site,” said Luxxfolio President Ken Maclean in a May 5 press release.

Thompson noted that the company has another 7MW of power coming online in mid-May, bringing total available power to 15MW at one facility and the analyst also noted that Luxxfolio’s power is low-cost at about US$4.24 cents per kWh and about 60 per cent from renewable energy.

Looking ahead, Thompson is calling for LUXX to generate fiscal 2022 (year end August) revenue and EBITDA of $17 million and $8 million, respectively, and fiscal 2023 revenue and EBITDA of $25 million and $11 million, respectively.

“Our 2023 EBITDA estimate moves 68 per cent lower primarily due to revised bitcoin economics. We are lowering our target to $0.40 (was $1.20) which equates to an EV/EBITDA of 5.4x (was 3.9x) on F2022E and 3.9x on our F2023E (we are rolling forward our valuation one year based on an August fiscal year end),” Thompson said.