On Thursday, Compass Point adjusted its outlook on Cipher Mining (NASDAQ:CIFR), lowering the price target to $7.50 from $8.00 while reaffirming a Buy rating. The adjustment followed Cipher Mining's first-quarter 2024 earnings report, which showed revenues and adjusted EBITDA aligning with expectations.
Despite the solid financial performance, CIFR's share price experienced a decline after the earnings announcement. This was attributed to the company's relatively high valuation based on CY24 EBITDA and the anticipated capital expenditures for expansion in CY25 at its Black Pearl facility.
Cipher Mining's position in the market remains favorable according to Compass Point, due to its competitive power and hash costs. The firm acknowledges that while there are execution risks for Cipher Mining in comparison to other miners in CY25, the planned upgrades at Black Pearl have the potential to significantly reduce hash costs to around $0.02. This would position the company for strong profitability regardless of the hash price in CY25. The stock is currently trading at a multiple of 4x enterprise value to EBITDA for CY25, suggesting upside potential.
The company's strategy for funding its expansion includes several options. Compass Point highlights that Cipher Mining could utilize operating cash flow, its current Bitcoin holdings, which amount to 2,000 BTC, or an at-the-market (ATM) offering that could be accretive to the company's financials. These funding levers are seen as viable means to support the company's growth initiatives.
In light of these factors, Compass Point stands by its Buy rating on Cipher Mining. However, the revised price target reflects a modest increase in the expected share count and a more conservative outlook on the capital expenditure requirements for the company's expansion plans.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.