Bitfarms price target chopped at ATB Capital

Following the company’s fourth quarter results, ATB Capital analyst Martin Toner has cut his price target on Bitfarms (Bitfarms Stock Quote, Chart, News, Analysts, Financials TSX:BITF).

On March 27, BITF reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $14.0-million on revenue of $56.0-million, a topline that was up 21%, year-over-year.

“Bitfarms is a completely different company than we were at the beginning of 2024. Across nearly every metric, we have rapidly transformed from the international Bitcoin miner to a North American energy and compute company,” CEO Ben Gagnon said. “We now have one of the largest portfolios of flexible MW in the PJM market among Bitcoin miners and are well-positioned to capitalize on macro tailwinds and surging demand for U.S. power and infrastructure. From January 2024, we’ve grown our energized capacity over 90% to 461 MW and secured a multi-year pipeline of over 1.4 GW, nearly 80% of which is based in the U.S and over 90% of which is based in North America.”

Toner summarized the quarterly results.

“Before market open on March 27, BITF reported Q4/24 revenue of $56.2mm (+27% q/q), in-line with consensus of $56.0mm. Mining gross profit, which excludes depreciation, was $25.8mm, below our estimate of 31.8mm, resulting in a mining gross profit margin of 46%, down from a 51% margin in Q3/24, driven by an increase in the network hash rate. Adjusted EBITDA of $14.3mm slightly missed consensus of $15.9mm,” he wrote. “As a reminder, on January 28, BITF entered into a binding Letter of Intent to sell its 200MW mining site in Yguazu, Paraguay to HIVE Technologies, Ltd. (HIVEO, NR), whereby HIVE purchased BITF’s 100% stake in the site for total consideration of $85mm. According to management, capex requirements for 2025 are now 20% lower than previously planned (ATBe estimate of $95mm) and there are “no plans” for large miner purchases in 2025 or 2026, with capital instead being deployed towards developing energy and HPC infrastructure in the US. By 2025 end, management expects to have 500MW of power capacity, up from 461MW today. We are constructive on BITF’s HPC/AI vision, though we believe a customer contract could be ~12 months+ and BITF will likely need to raise more capital to fund its infrastructure build-out in the interim. We are also encouraged that BITF at its current EH/s levels will be able to mine profitably in 2025, taking pressure off the balance sheet. We lowered our EH/s growth assumptions given the focus on HPC/AI, while factoring in the share dilution following the Stronghold deal close.”

In a research update to clients March 27, Toner maintained his “Outpeform” rating on BITF, but lowered his price target on the stock from $6.50 to $3.75, implying a return of 177.7% at the time of publication.

The analyst thinks the company will post Adjusted EBITDA of$194.0-million on revenue of $422.4-million in fiscal 2025. He expects Adjusted EBITDA of $228.1-million on revenue of $525.7-million in fiscal 2026.

“Our price target is based on a sum-of-the-parts (SOTP) and multiples-based approach,” Toner concluded. “Our 12-month price target is based on 4.5x BITF’s 2026 EBITDA (previously 5.5x), and $200mm of HPC value given an assumed 20% probability of developing 100MW at a value of $10mm per MW.”