CleanSpark shares: buy, sell or hold?

CleanSpark‘S (CLSK -0.72%) Shares fell 6% on August 9 after its latest earnings report fell short of Wall Street expectations. For the third quarter of fiscal 2024 (which ended June 30), the low-carbon Bitcoin (BTC 3.17%) The mining company’s revenue rose 129% year-on-year to $104.1 million, but missed analysts’ estimates by $6.8 million.

Net loss widened to $236.2 million, or $1.03 per share, from $14.1 million, below the average forecast of $0.04 per share. Adjusted loss before interest, taxes, depreciation and amortization (EBITDA) decreased to negative $12.7 million, compared to positive adjusted EBITDA of $13.3 million a year ago.

Image source: Getty Images.

CleanSpark’s numbers were disappointing, but does the post-earnings drop represent a good buying opportunity? Let’s take a closer look at this Bitcoin miner’s unique business model and discuss the top reasons to buy, sell, or hold the stock.

A fast-growing niche game in the field of “green” Bitcoin mining

CleanSpark is the third largest publicly traded Bitcoin miner in the world, after Marathon Digital (MARA 2.52%) And Riot Platforms (REBELLION 3.02%)But unlike the two larger mining companies, both of which use coal-fired and other fossil fuel power plants, CleanSpark is developing modular microgrids for wind, solar and other renewable energy sources.

CleanSpark’s microgrids channel these low-carbon energy sources into storage systems, backup generators and load management solutions. The microgrids can be deployed as standalone systems or integrated into centralized grids to reduce costs and emissions.

CleanSpark only became a Bitcoin miner after acquiring ATL Data Centers in May 2021. The company upgraded ATL’s Bitcoin mining facilities with its own microgrids to increase their efficiency and demonstrate that it is possible to mine Bitcoins using low-carbon energy solutions. The company then acquired additional mining facilities and upgraded them in the same way.

CleanSpark’s expansion attracted a lot of attention because it coincided with rising energy prices, sharper criticism of coal-based bitcoin mining, and the bitcoin halving in April, which drove up mining costs by cutting profits in half. That’s likely a key reason why CleanSpark stock has nearly doubled in the past 12 months. Marathon stock rose less than 20%, while Riot stock fell nearly 50%.

Is CleanSpark’s business sustainable?

Bitcoin miners typically measure their growth by their mining efficiency, which is measured in exahashes per second (EH/s), and their total bitcoins held. CleanSpark’s hashrate and bitcoin holdings have skyrocketed since acquiring ATL Data Centers.

Data source: CleanSpark. The fiscal year ends in September.

This rapid growth was fueled by the acquisition of other Bitcoin miners. Earlier this year, the company completed the acquisition of five turnkey sites in Georgia and agreed to purchase the Bitcoin infrastructure company. GRIID infrastructure (GRDI -2.57%) in a $155 million stock deal. These deals resulted in the company incurring large losses under generally accepted accounting principles (GAAP), but its adjusted EBITDA grew steadily in line with rising revenues.

Data source: CleanSpark.

CleanSpark achieved this growth despite the fact that the Bitcoin price suffered some wild swings, rising only about 30% over the past three years. For the full year, analysts expect CleanSpark’s revenue to rise about 150% to $423.6 million and adjusted EBITDA to rise to $291.8 million. We should take these estimates with a grain of salt, as they are closely tied to the volatile Bitcoin price, but CleanSpark stock looks cheap at 6 and 8 times this year’s revenue and adjusted EBITDA, respectively.

By comparison, Marathon trades at 8 and 12 times this year’s revenue and adjusted EBITDA, respectively. Riot trades at 5 times this year’s revenue and 8 times its adjusted EBITDA.

Is it time to buy, sell or keep CleanSpark?

It might make sense to sell CleanSpark if you’re bearish about Bitcoin’s future. But if you’re optimistic about Bitcoin’s future, it appears to be an undervalued growth instrument with more upside than its coal and fossil fuel competitors. It’s a speculative stock, but it could yield big gains for patient investors who buy it and hold it for the next few years.