Analyst deems Bitfarms stock 'under-priced' amid transition to AI and energy focus

Analyst Mike Colonnese from H.C. Wainwright & Co. has included Bitfarms' stock in the firm's top choices for the Bitcoin mining sector by 2025. He highlighted the company's significant operational advancements and its transition towards high-performance computing and AI infrastructure.

In his research note after Bitfarms' Q4 2024 earnings report and conference call, Colonnese stated that the market is "substantially undervaluing" the company's expanded mining operations and burgeoning AI strategy.

H.C. Wainwright reaffirmed its Buy rating on Bitfarms, with a price target of $3.50 per share, indicating over three times upside potential from its current price of approximately $0.98.

Q4 summary

Bitfarms announced its Q4 2024 results on March 27. The reported revenue of $56.2 million increased by 25% quarter-over-quarter and matched analyst expectations. Self-mining revenue increased to $54.6 million, due to higher average Bitcoin (BTC) prices and a 13% rise in deployed hashrate to 12.8 EH/s by year-end. Gross mining profit improved to $25.8 million with a 47.3% margin, up from 38.4% in the previous quarter.

Despite a drop in Bitcoin production to 654 BTC due to increasing network difficulty, the company still reported net income of $15.2 million, or $0.03 per share, a strong recovery from a net loss of $36.6 million in Q3. Adjusted EBITDA almost tripled to $14.3 million.

Bitfarms has expanded its hashrate capacity to 18.6 EH/s, almost tripling its computing power from 6.5 EH/s at the end of 2023. Fleet upgrades have also enhanced overall efficiency by 45%, with hash costs now averaging around $20-$22 per petahash, notably below the current market hash prices of ~$50/PH.

However, Bitfarms' stock has dropped 57% since November, compared to a 7% decrease in the Nasdaq index during the same period. Colonnese believes the company's current valuation of ~$25 million per deployed EH is a significant discount compared to its peers, who trade closer to $85 million per EH.

Energy assets to fuel AI growth

Looking past mining, Bitfarms is positioning itself as a North American energy and compute company.

On the conference call, management mentioned that there are no immediate plans to buy more ASIC miners, and future growth will focus on developing energy infrastructure to support AI and HPC workloads.

This shift includes the recent acquisition of Stronghold assets and the sale of its Paraguay-based Yguazu site, raising the U.S. share of its energy portfolio from 6% to 33%. Bitfarms now aims to grow to 1.4 GW of total energy capacity by 2028, with nearly 80% located in the U.S.

Colonnese observed that the HPC/AI opportunity is not yet reflected in current projections, and a possible partnership with a hyperscaler could provide significant upside.