On Thursday, Cantor Fitzgerald adjusted its price target for Iris Energy Ltd. (NASDAQ: NASDAQ:IREN) shares, reducing it to $20.00 from the previous $23.00, while still maintaining an Overweight rating on the stock.
The revision came after the company's adjusted EBITDA fell short of the firm's expectations, primarily due to increased operating expenses linked to rapid expansion at its Childress facility.
The analyst noted that Iris Energy's revenue and electricity costs aligned with their estimates. However, the company's operational expenditures have risen, impacting its profitability.
Despite this, management has confirmed that they are on schedule to achieve their hash rate goals by the end of September and December, aiming for 20 EH/S and 30 EH/S, respectively.
Iris Energy is currently constructing two 25 MW buildings each month and has secured an option to purchase 10 EH/S of Bitmain's latest generation mining rigs, which are expected to be delivered and installed by the end of the year.
Additionally, the company has extended its option to purchase 20 EH/S of rigs into the calendar year 2025, providing them with the flexibility to potentially reach a hash rate capacity of 50 EH/S by the end of CY25.
While there were no significant developments regarding Artificial Intelligence/High-Performance Computing (AI/HPC), the company is progressing with its plans to introduce an AI/HPC pilot in Childress by the year's end. They are also continuing to assess potential opportunities for their 1.4 GW site in West Texas, with several parties showing interest and signing nondisclosure agreements to evaluate the site.
The firm remains optimistic about Iris Energy's prospects, highlighting its trajectory towards becoming a leading Bitcoin miner, currently at 15 EH/S, and the potential for significant AI/HPC capabilities.
The downward revision in the price target to $20 reflects recent movements in Bitcoin prices and network hash rates, as well as market de-rating since the last valuation update. Despite the lower price target, the Overweight rating is reaffirmed, with the stock's valuation still considered attractive due to its AI/HPC potential.
In other recent news, IREN, a key player in Bitcoin mining and AI cloud services, reported robust growth in its fiscal year 2024 results. The company's Bitcoin mining capacity has notably increased to 15 exahash, with ambitions to reach 20 exahash next month and 30 exahash by the end of the year. IREN's AI cloud service segment continues to show strong revenue growth, and plans are in place to launch a GPU pilot at the Childress site.
The company also revealed a solid cash position and total equity of $1 billion, alongside a robust balance sheet with total assets amounting to $1.2 billion. These financials provide substantial flexibility for future expansion.
On the downside, the company disclosed manufacturing defects with Bitmain's T21 miners, necessitating the replacement of around 1.5 exahash of capacity. Despite this, IREN remains optimistic, with plans to double its Bitcoin mining capacity in the next four months and a robust pipeline for AI cloud service growth. These are the recent developments that investors should be aware of.
InvestingPro Insights
As Iris Energy Ltd. (NASDAQ: IREN) navigates the dynamic landscape of Bitcoin mining and AI/High-Performance Computing, there are key financial metrics and insights from InvestingPro that could help investors gauge the company's performance and potential. With a market capitalization of approximately $1.47 billion, Iris Energy is a noteworthy player in its sector. Notably, the company holds more cash than debt on its balance sheet, indicating a solid liquidity position that could support its expansion plans. Furthermore, analysts are optimistic about the company's sales growth in the current year, which aligns with the management's confidence in achieving their hash rate targets.
InvestingPro Tips highlight Iris Energy's impressive gross profit margin, which stood at an exceptional 88.16% for the last twelve months as of Q3 2024. This figure suggests that the company is highly efficient in converting revenue into gross profit. However, the company has not been profitable over the last twelve months, with a negative operating income margin of -8.25%. Despite this, analysts predict that Iris Energy will turn profitable this year, a projection that could further interest potential investors.
In terms of stock performance, Iris Energy has experienced significant price volatility recently, with a notable decline of over 23% in the past month. Nevertheless, the stock has seen a large price uptick over the last six months, indicating a degree of recovery and investor confidence. For those considering an investment, Iris Energy does not pay a dividend, which may influence the decision-making process for income-focused investors.
For a deeper dive into Iris Energy's financial health and future prospects, InvestingPro offers additional tips and insights, which can be found at InvestingPro's dedicated Iris Energy page. With these tools, investors can make more informed decisions backed by real-time data and expert analysis.
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