TeraWulf wins price target raise at ATB

ATB Capital Markets analyst Martin Toner maintained his “Outperform” rating on TeraWulf (TeraWulf Stock Quote, Chart, News, Analysts, Financials NASDAQ:WULF) and raised his one-year target to US$13.00 from US$9.00 in an August 14 update.

Before the market opened on Aug. 8, TeraWulf reported Q2 fiscal 2025 consolidated revenue of $47.6-million, in line with consensus, while Adjusted EBITDA of $14.5-million exceeded expectations of $10.4-million. The company postponed its Q2 earnings call until this morning to coincide with two major announcements.

First, TeraWulf signed two 10-year high-performance computing (HPC) colocation agreements with Fluidstack, an AI cloud platform, to deliver over 200MW of critical IT load (about 250MW gross capacity) at its Lake Mariner facility. The contract is valued at about $3.7-billion in revenue over the initial term, with the potential to reach about $8.7-billion if two five-year extension options are exercised, implying roughly $1.5-million per MW. Net operating income margins are expected at 85%, with capital expenditures of $8-million to $10-million per MW. Alphabet Inc. will backstop $1.8-billion of Fluidstack’s lease obligations to support project debt financing and will receive warrants for 41 million TeraWulf shares, representing an 8% equity stake.

Second, the company secured an 80-year ground lease for 183 acres at the Cayuga site to expand infrastructure. The lease, signed with Cayuga Operating Company, owned by TeraWulf’s CEO, unlocks up to 400MW of capacity, with 138MW expected online in 2026. Approved by an independent board committee, the deal includes $95-million in TeraWulf stock and $3-million in cash.

“We think the deal cements WULF’s transition as an HPC player, with 322.5 gross MW now leased, with 800–850 additional MW available,” Toner said. “With 150–200MW of incremental HPC deployments now expected annually, we update our estimates to include additional HPC capacity and updated economics of the Fluidstack deal.”

Bitcoin mining revenue of $47.6-million, up 33.9% year-over-year, was in line with consensus. The company reported a direct cost per BTC mined of $45,608 in Q2, down from $66,156 in Q3, reflecting a 35% quarter-over-quarter drop in power costs at Lake Mariner due to unusually cold weather in Q1.

For the Core42 deal, management expects capex per gross MW of $6.0-million, with an EBITDA yield of 16.5%. EBITDA margins are projected at about 75%, with revenue per MW of $1.6-million in year one, up from $1.5-million, and a 3% annual escalator. For the Fluidstack deal, the 10-year contract is valued at about $3.7-billion, with the same $8-million to $10-million per MW capex range.

TeraWulf plans to deploy the first 72.5MW of the Core42 deal by the end of 2025, with 322.5MW in total expected online by the end of 2026, including the full Fluidstack capacity. For Fluidstack, 40MW is scheduled to be online by the first half of 2026, with full deployment by year-end. By 2027, management anticipates about 500MW deployed, followed by 150–200MW of annual capacity additions.

Toner said TeraWulf should generate $81.1-million in Adjusted EBITDA on revenue of $228.8-million in fiscal 2025, rising to $264.6-million on revenue of $507.7-million in fiscal 2026.

“Our price target is based using a blended average of a sum-of-the-parts (SOTP) and multiples-based approach and a DCF,” he said. “We value WULF’s HPC assets using a multiple of 22x 2026 EV/EBITDA (based on data centre REIT comps) and our discounted cash flow (DCF), using a weighted average cost of capital (WACC) of 9.0% (from 9.7%) and a terminal growth rate of 3.5%. Our DCF model implies a terminal EV/EBITDA multiple of 17x in 2033.”

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