Bit Digital (BTBT -4.50%) is among the top cryptocurrency-related stocks that's seen a sharp uptick in today's session. Shares of the stock are up more than 17% at the time of writing, after the company announced earnings.
Bit Digital's report was a mixed bag, with the company reporting a wider-than-expected loss for its second quarter and a stronger forecast for revenue than the market had anticipated. As a top Bitcoin mining company, such volatility is to be expected, and today's results have certainly brought the kind of price move many investors may have already anticipated.
The thing is, this move appears to have little to do with the numbers Bit Digital ultimately reported. The company's high-performance computing (HPC) division appears to be the key focus of investors, with the company announcing its second client (Boosteroid) will be purchasing GPU servers over a five-year period, in a deal that should be worth around $13 million in revenue.
Let's dive more into what this may mean for investors.
Bit Digital surges on key customer acquisition
Bit Digital is best known as a Bitcoin mining company, and is typically valued on the basis of its current Bitcoin holdings and future prospective cash flows from mining activities. This business is inherently risky, and typically leads to plenty of volatility around earnings reports. Thus, today's action in Bit Digital's stock price isn't necessarily out of the ordinary.
That said, it's clear many investors in this space are looking for more consistency from companies like Bit Digital. In the past, Bit Digital's earnings numbers have varied so widely that its current multiple of around 12 times trailing earnings isn't really helpful.
However, this announced customer acquisition in the company's high-performance computing division could change the calculus for investors. Bit Digital estimates the total market opportunity could be as much as $700 million. So, for a company valued at roughly $500 million with its price-to-earnings multiple where it is, this potential stream of durable and sustainable revenue could result in significant multiple expansion over time.
Is the price right?
Even after today's rally, Bit Digital's valuation does appear to be depressed, with the market clearly pricing in a large margin of safety with this stock at current levels. As we've seen in the past, Bitcoin prices can go all over the place. And over the very long term, it's largely true that Bitcoin miners will continue to consolidate or be pushed out of business, as energy costs rise and Bitcoin's block rewards continue to halve.
But generating new revenue streams could completely shift the narrative around this company. Perhaps that's what's happened today. I'll have to see if this rally can continue from here, but for now, this is a crypto mining stock that I think warrants a deeper look.
