Tuesday, Compass Point maintained its Buy rating on Bitfarms Ltd. (NASDAQ: BITF) but reduced the price target to $6.00 from $7.00. The adjustment follows Bitfarms' first-quarter 2024 performance that fell short of expectations, with revenues and adjusted EBITDA coming in below projections.
The shortfall was attributed to a lower average operating hash rate and increased general and administrative expenses. Despite this, the cryptocurrency mining company confirmed its operational targets, aiming to reach 12 EH/s with an efficiency of 25 J/Th by the end of the second quarter of 2024 and 21 EH/s at 21 J/Th thereafter.
Compass Point highlighted Bitfarms' strategic timing in the Bitcoin hash price cycle and potential growth from its expansion in Paraguay and fleet upgrades, which are expected to significantly reduce hash costs. The firm believes these factors are currently undervalued by the market.
Additionally, the recent dismissal of Bitfarms' CEO has placed short-term pressure on the stock. However, the appointment of a new CEO in the coming weeks is anticipated to be a positive driver for the company's shares.
The analyst at Compass Point also pointed out that if Bitfarms does not experience a revaluation based on its performance and stronger results in the second half of 2024 or 2025, the company could become an attractive merger and acquisition target.
This is due to its diversified revenue streams and access to international power markets, such as the recently announced 100MW expansion potential in Paraguay during calendar year 2025.
The firm's stance is that the future growth in hash rate will likely gravitate towards international markets where power competition is more intense, particularly as it becomes more competitive in the United States.
The updated price target of $6.00 reflects a revised multiple and an increased share count. Compass Point's continued endorsement of a Buy rating indicates their optimism about Bitfarms' future performance despite the recent adjustments to financial expectations.
InvestingPro Insights
As Compass Point maintains its Buy rating on Bitfarms Ltd. (NASDAQ: BITF), it's essential to consider the latest InvestingPro data and tips to gain a deeper understanding of the company's financial health and market position. According to InvestingPro, Bitfarms holds more cash than debt on its balance sheet and analysts anticipate sales growth in the current year, which could signal a solid foundation for future growth. However, it's also noted that the company is quickly burning through cash, which could be a point of concern for potential investors.
The real-time data from InvestingPro shows a market cap of $689.4M USD, indicating a moderate size within its sector. The revenue growth over the last twelve months stands at 26.09%, demonstrating Bitfarms' ability to expand its top-line figures. Despite this growth, the company's gross profit margin is negative at -14.3%, highlighting challenges in maintaining profitability. Additionally, the significant price volatility is evident with a 13.98% return over the last week, but a -41.75% return over the last three months, which could indicate a higher risk profile for the stock.
For investors looking for a more comprehensive analysis, InvestingPro offers additional tips that delve into the company's financials, valuation, and market performance. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to these valuable insights. Currently, there are 12 additional InvestingPro Tips available on https://www.investing.com/pro/BITF, which could further inform investment decisions regarding Bitfarms Ltd.
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