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Friday, July 19, 2024

3 Crypto Mining Stocks That Are the Hidden Gems of the Market

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In my view, the next 24 to 36 months will be a period of another big bull market for cryptocurrencies. Direct exposure to Bitcoin (BTC-USD) and quality altcoins can deliver multibagger returns during this period. At the same time, investors can consider proxy exposure to the crypto bull market. One way is to buy fundamentally strong crypto mining stocks.

It’s worth noting that some of the best Bitcoin miners had a volatile 2023. Of course, an upward bias was in sync with Bitcoin trending higher. With the Bitcoin spot ETF and the impending halving event, I expect the crypto asset to surge this year. Potential expansionary monetary policies will add fuel to the fire.

It’s, therefore, a good time to consider exposure to some of the best crypto mining stocks. Some relatively big names like Riot Platforms (NASDAQ:RIOT) and Marathon Digital (NASDAQ:MARA) are in the limelight. This column focuses on crypto mining stocks that are hidden gems.

Bitfarms (BITF)

Bitcoin and crypto mining farm. Big data center. High tech server computers at work. Bitfarms (BITF) mines crypto.

Source: PHOTOCREO Michal Bednarek / Shutterstock.com

Bitfarms (NASDAQ:BITF) stock is among the penny crypto mining stocks poised for 5x returns, assuming that Bitcoin trades at new all-time highs. Over 12 months, BITF stock has surged by 91%. However, there has been a considerable correction from recent highs of $3.56 to current levels of $2.1. I see this as a good opportunity for fresh exposure.

It’s worth noting that as of December 2023, Bitfarms reported a hash rate capacity of 6.5EH/s. The company expects to boost capacity to 17EH/s. Further, with redeployments, capacity can potentially increase to 21EH/s. Therefore, Bitfarms is positioned for stellar growth and cash flow upside, assuming a scenario where Bitcoin’s rally is sustained.

I must add that Bitfarms has a total liquidity buffer of $118 million. Further, the company will be debt-free next month. Therefore, there is ample financial flexibility for pursuing sustained expansion. Strong cash flows will add to the flexibility for pursuing growth beyond 2024.

Cipher Mining (CIFR)

Concept art of crypto mining with little figuring and a Bitcoin token.

Source: Shutterstock

Cipher Mining (NASDAQ:CIFR) stock has surged 108% in the last 12 months. However, with aggressive growth plans, I am bullish on further upside for CIFR stock. Of course, the key assumption is that Bitcoin remains in an uptrend. It’s also worth noting that CIFR stock has a short interest of 23%. A short-squeeze rally seems likely in the foreseeable future.

From a growth perspective, Cipher Mining reported a capacity of 7.2EH/s as of December 2023. With the expansion plans (including purchase options), capacity will likely swell to 24.2EH/s. The company is, therefore, positioned for aggressive growth over the next 24 months. This will translate into robust free cash flows if Bitcoin trades near all-time highs.

It’s worth noting that as of December 2023, Cipher reported $120 million in liquidity, considering the value of Bitcoin assets. Further, with no debt, the company has high financial flexibility to pursue expansion beyond the current year.

HIVE Digital Technologies (HIVE)

HIVE Blockchain Technologies logo over a map of the world. HIVE stock.

Source: karnoff / Shutterstock

HIVE Digital Technologies (NASDAQ:HIVE) stock has remained sideways in the last 12 months. A breakout on the upside seems imminent for this under-the-radar crypto mining stock—positive business developments back my view.

As of Q2 2024, HIVE reported a hash rate capacity of 4.3EH/s. In the current year, the company expects to increase capacity to 6EH/s. With an attractive cost profile, I expect a healthy EBITDA margin if Bitcoin continues to trend higher. Last quarter, the company reported gross operating margin of 21%.

Another reason to like HIVE is that the company is looking beyond Bitcoin mining for growth. HIVE Digital is also focused on AI, HIVE Cloud, and GPU. With the company spreading its wings, I am bullish as growth is not limited to Bitcoin mining. I will not be surprised if HIVE explores the application of blockchain technology in various industries in the coming years.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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