Iris Energy Gets Upgrade After Bitmain Equipment Deal, Analyst Expects Stock To Double

  • HC Wainwright & Co analyst Mike Colonnese upgraded Iris Energy Ltd IREN from Neutral to Buy and an $8 price target.
  • Earlier this week, IREN disclosed a transaction in which it could utilize all $67 million of remaining mining equipment deposits with Bitmain as part of an existing equipment contract to acquire 4.4 EH/s of S19j Pros (44,000 rigs) for its self-mining operations. 
  • The transaction fully resolved IREN’s contract with no remaining commitments to Bitmain. 
  • With greater clarity around the future of IREN’s self-mining operations following the resolution of the Bitmain equipment contract, the analyst renewed confidence in the company’s ability to drive material revenue growth over the coming quarters. 
  • In his view, the news changed the narrative for shares, as IREN had gone from considering lower-margin hosting to monetize excess mining infrastructure as recently as December to now poised to deliver a 224% increase in self-mining capacity in 1H23. 
  •  IREN defaulted on two equipment finance loans totaling $108 million in November 2022, which reduced the company’s operating hash rate.
  • There had also been a great deal of uncertainty around the company’s ability to unlock mining equipment under contract with Bitmain. IREN stopped making payments in August 2022 due to the challenging operating environment.
  • Yesterday, IREN reported December quarter results. In F2Q23, IREN saw total mining revenues decline 15% sequentially to $13.8 million (ahead of his $13.2 million estimate), primarily driven by lower BTC prices and a reduction in the number of BTC mined due to rising network difficulty.
  • The analyst raised his calendar-year 2023 revenue estimate to $121.5 million, up from $54.7 million on higher hash rate assumptions for IREN and higher BTC prices.
  • The price target reflects a slight discount to mining peers, given IREN’s no-hold-on for-dear life (HODL) strategy. 
  • Price Action: IREN shares traded higher by 4.81% at $4.47 on the last check Thursday.
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