CleanSpark's (CLSK) shares fell 6% on Aug. 9 after its latest earnings report fell short of Wall Street's expectations. For the third quarter of fiscal 2024 (which ended on June 30), the low-carbon Bitcoin (BTC -0.03%) miner's revenue surged 129% year over year to $104.1 million but it missed analysts' estimates by $6.8 million.
Its net loss widened from $14.1 million to $236.2 million, or $1.03 per share, which also missed the consensus forecast for a loss of $0.04 per share. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss slipped to negative $12.7 million, compared to a positive adjusted EBITDA of $13.3 million a year ago.
Image source: Getty Images.
CleanSpark's headline numbers were disappointing, but does its post-earnings pullback represent a good buying opportunity? Let's review this Bitcoin miner's unique business model and discuss the key reasons to buy, sell, or hold the stock.
A high-growth niche play on "green" Bitcoin mining
CleanSpark is the world's third largest publicly traded Bitcoin miner, after Marathon Digital (MARA -2.62%) and Riot Platforms (RIOT -0.17%). But unlike those two larger miners, which both use coal-fired and other fossil fuel plants, CleanSpark develops modular microgrids for wind, solar, and other renewable energy sources.
CleanSpark's microgrids funnel those low-carbon energy sources into storage systems, backup generators, and load management solutions. Its microgrids can be deployed as stand-alone systems or plugged into centralized grids to cut costs and emissions.
CleanSpark only evolved into a Bitcoin miner after it acquired ATL Data Centers in May 2021. It upgraded ATL's Bitcoin mining facilities with its own microgrids to increase their efficiency and show that it was possible to mine bitcoins with low-carbon energy solutions. It subsequently acquired more mining facilities and upgraded them in the same way.
CleanSpark's expansion attracted a lot of attention because it coincided with soaring energy prices, tougher criticisms of coal-powered Bitcoin mining, and Bitcoin's halving this April, which drove up mining costs by cutting the rewards in half. That's probably one of the primary reasons CleanSpark's stock almost doubled during the past 12 months. Marathon's stock advanced less than 20% as Riot's stock declined by nearly 50%.
Is CleanSpark's business sustainable?
Bitcoin miners usually gauge their growth with their mining efficiency, which is measured in exahashes per second (EH/s), and their total bitcoins held. CleanSpark's hashrate and Bitcoin holdings have soared since its acquisition of ATL Data Centers.
|
Metric |
FY 2021 |
FY 2022 |
FY 2023 |
9M FY 2024 |
|---|---|---|---|---|
|
Hashrate |
1 EH/s |
4 EH/s |
10 EH/s |
22 EH/s |
|
Bitcoin Assets Held |
$27.5M |
$11.1M |
$56.0M |
$413.0M |
Data source: CleanSpark. Fiscal year ends in September.
That rapid growth was driven by its ongoing acquisitions of other Bitcoin miners. Earlier this year, it closed its acquisition of five turnkey sites in Georgia, and it agreed to buy the Bitcoin infrastructure company GRIID Infrastructure (GRDI) in a $155 million all-stock deal. Those deals caused it to rack up some steep generally accepted accounting principles (GAAP) losses, but its adjusted EBITDA grew steadily alongside its soaring revenues.
|
Metric |
FY 2021 |
FY 2022 |
FY 2023 |
9M FY 2024 |
|---|---|---|---|---|
|
Revenue |
$49.4M |
$131.5M |
$168.4M |
$289.7M |
|
Adjusted EBITDA |
($3.5M) |
$32.5M |
$25.0M |
$238.2M |
|
GAAP Net Income |
($22.0M) |
($57.7M) |
($136.7M) |
($87.0M) |
Data source: CleanSpark.
CleanSpark achieved that growth even though Bitcoin's price endured some wild swings and only rose about 30% over the past three years. For the full year, analysts expect its revenue to surge about 150% to $423.6 million as its adjusted EBITDA to rise to $291.8 million. We should take those estimates with a grain of salt, since they're tightly tethered to Bitcoin's volatile price, but CleanSpark's stock looks cheap at 6 and 8 times this year's revenue and adjusted EBITDA estimates, respectively.
In comparison, Marathon trades at 8 and 12 times this year's revenue and adjusted EBITDA, respectively. Riot trades at 5 times this year's sales and 8 times its adjusted EBITDA.
Is it time to buy, sell, or hold CleanSpark?
It might make sense to sell CleanSpark if you're bearish on Bitcoin's future. But if you're bullish on Bitcoin's future, it seems like an undervalued growth play with more upside potential than its coal and fossil fuel-powered competitors. It's a speculative stock, but it might just generate big gains for patient investors who buy and hold it for the next few years.
