On Monday, H.C. Wainwright maintained a Buy rating and a stock price target of $2.50 on NASDAQ:DGHI, Digihost Technology Inc., which currently trades at $2.12 with a market capitalization of $69 million. According to InvestingPro data, the stock has shown strong momentum with a 61% return over the past six months, despite its notably high beta of 7.2.
The firm highlighted the company's successful shift from bitcoin mining to hosting services. Digihost reported a significant turnaround, posting $5.5 million in EBITDA for the first three quarters of 2024, compared to a loss of $2.3 million in the same period the previous year.
The company achieved impressive revenue growth of 101% in the last twelve months, though InvestingPro analysis indicates it operates with relatively weak gross profit margins of 17%.
The company's third-quarter results showed a consistent revenue of $9.2 million, mirroring the second quarter of 2024, but with a notable change in the revenue mix. Co-location services revenue surged to $7.1 million in the third quarter from $2.2 million in the second quarter, while energy sales decreased to $1.6 million from $4.1 million in the same quarter of the previous year.
Bitcoin self-mining also saw a decline to $0.5 million from $3.0 million in the second quarter, a shift aided by the halving event and the company's reduced focus on self-mining operations.
Digihost's strategic move to prioritize hosting crypto mining and potentially high-performance computing (HPC) over self-mining bitcoin was emphasized as a key financial and strategic development for the third quarter of 2024.
Moreover, the company's enhanced communication with the investment community was noted, marked by the hiring of an investor relations agency and hosting its inaugural public earnings call on Thursday, November 15.
The positive outlook from H.C. Wainwright comes as Digihost continues to adjust its business model in response to the evolving cryptocurrency mining landscape. The company's transition towards hosting services appears to be paying off, as evidenced by the improved EBITDA figures and the recalibrated revenue streams.
InvestingPro analysis suggests the stock is currently undervalued, with additional insights available including 8 more ProTips that could help investors better understand the company's potential in this transitional phase.
In other recent news, Digihost Technology has been drawing attention with its strategic shift towards hosting and collocation services. The company's revenues fell to $9.2 million in the second quarter of 2024, down from $13.0 million in the first quarter. However, this surpassed H.C. Wainwright's expectations of $8.1 million, prompting the firm to maintain a Buy rating on the company.
Self-mining revenue declined to $3.0 million in the second quarter, while revenue from collocation and energy sales increased to $6.3 million. Digihost has set a target to reach a total hashing power of 6Eh/s by year's end, up from 2.75Eh/s at the end of the second quarter.
The company's growth strategy involves investment in infrastructure and the integration of next-generation mining equipment. A notable development was a profit-sharing agreement to integrate 11,000 S21 miners, which will add approximately 2.2Eh/s of hashing power.
Despite facing regulatory challenges with its natural gas-fired power plant in North Tonawanda, Digihost's operational capacity is supported by approximately 103MW of power from its sites in upstate New York and Alabama, with an additional 200MW undeveloped in North Carolina. These are the latest developments in the company's ongoing transition.
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