In 2023, Bitcoin investors have witnessed remarkable gains amidst a backdrop of economic instability and geopolitical uncertainties. The leading cryptocurrency has more than doubled in value, attracting investors who now perceive it as a safe-haven asset during turbulent times. This shift in perspective marks a significant departure from Bitcoin’s earlier reputation as an extremely volatile and risky asset.
According to Gautam Chhugani, a digital asset expert and analyst at Bernstein, this year’s surge in Bitcoin’s value may be just the beginning of a new bull cycle. Chhugani points to upcoming catalysts that could drive Bitcoin to new heights, such as the imminent approval of SEC-authorized ETFs by major asset managers like BlackRock and Fidelity, as well as the Bitcoin ‘halving’ event scheduled for April 2024.
Chhugani predicts that by mid-2025, Bitcoin could reach a new high of $150,000, representing a nearly 4.5x increase from its current levels.
While investors can directly buy Bitcoin, Chhugani also suggests an alternative approach: investing in Bitcoin miner stocks, which offer a high-beta way to gain exposure to the cryptocurrency. These mining companies validate Bitcoin transactions and receive Bitcoin as a reward for their efforts.
Two Bitcoin mining companies, Riot Platforms and CleanSpark, have garnered Chhugani’s attention as prime candidates for investment. These companies are not only endorsed by the Bernstein analyst but also enjoy a Strong Buy consensus rating from the analyst community, according to the TipRanks database.
Riot Platforms (RIOT): Riot Platforms has outperformed Bitcoin itself, with its stock surging by 238% year-to-date. The company boasts a well-capitalized position, featuring a healthy cash balance of $289 million, minimal debt, and a strong balance sheet compared to other mining companies. Riot manages two large-scale Bitcoin mining facilities in Texas and engages in electrical switchgear engineering and fabrication operations in Denver, Colorado.
Riot has chosen a conservative approach to its balance sheet while focusing on growth. The company is in the process of acquiring a substantial number of MicroBT immersion-cooled miners, significantly increasing its mining capacity and positioning itself as a major player in the industry. Additionally, Riot generates revenue by selling excess electricity back to the grid, utilizing power credits to its advantage.
CleanSpark (CLSK): CleanSpark, a former microgrid solutions specialist, transitioned its primary focus to Bitcoin mining in late 2020. The company has adopted a strategy of holding onto the Bitcoin it mines, gearing up for the upcoming Bitcoin halving event that often triggers a bull market. CleanSpark has significantly increased its mining capacity, currently exceeding a total hashrate of 10 EH/s and aiming to reach 16 EH/s by the end of the year.
The company’s decision to purchase additional Antminer S21 bitcoin miners will further boost its capacity, potentially reaching a total hashrate of over 20 EH/s. CleanSpark’s concentration on self-mining Bitcoin, combined with a low power cost and no leverage usage, makes it an attractive option for investors.
Chhugani rates both Riot Platforms and CleanSpark as Outperform (Buy) and holds a positive outlook on their future prospects. His $15.6 price target for Riot Platforms suggests a 33% increase in the year ahead, while his $5.3 price target for CleanSpark implies a 14% premium. The consensus rating for Riot Platforms is Strong Buy, with an average target of $16.40, indicating a 40% growth potential. CleanSpark also holds a Strong Buy consensus rating, with all analysts unanimously recommending the stock, and an average target of $9.16, offering potential returns of 97% over the next 12 months.
Investors looking to benefit from Bitcoin’s upward trajectory may consider these two mining companies as strategic investment opportunities.
