DALLAS, TX -- December 7th, 2023 -- HIVE Digital Technologies LTD. (TSXV: HIVE): Stonegate Capital Partners updates coverage on HIVE Digital Technologies LTD. (TSXV: HIVE).
Business Overview
HIVE Digital Technologies is a Canadian-based sustainable Bitcoin mining Company with mining facilities in Canada, Sweden, and Iceland. As HIVE has expanded and upgraded its Bitcoin mining fleet, the Company has become one of the most efficient miners. HIVE went public in 2017 under the “HIVE” ticker on the TSX Venture Exchange and has since listed on the Nasdaq as well as the Berlin and Frankfurt Stock Exchanges. By combining its expertise in Bitcoin mining and data center operations, HIVE is also fueling the advancement of Web3, AI and HPC by actively participating in the decentralized digital economy.
Company Updates
- Preparing for the Halving: With the impending halving of Bitcoin expected in April of 2024, HIVE has been taking deliberate steps to prepare itself. In the last 12 months the Company has purchased 29,000 new generation ASIC machines. The Company has recently purchased 9,800 Bitmain S19k Pro miners to replace 38 J/TH ASIC machines with 22 J/TH ASICs, greatly improving efficiency. This is already being seen as the Company recently hit its interim goal of 4.0 EH/s.
- Repurposed GPUs: HIVE began repurposing its GPU fleet following the ETH Merge. In 2Q23 HIVE announced that GPUs would be used for cloud computing services supporting artificial intelligence (AI). With how GPU intensive AI applications are, this GPU allocation gives investors direct exposure to AI. Using approximately 400 GPUs out of the ~38,000 available, HIVE saw a very successful beta test. Since the completion of this beta, the Company is generating ~$250,000 per month from GPUs as of November, with the goal to generate $250,000 per day.
- Name Change as Industry Evolves: In July, the Company changed its name from “HIVE Blockchain Technologies” to “HIVE Digital Technologies”. This adjustment was made to more fully capture the potential that HIVE sees in the market to not only take advantage of the possibilities provided by mining Bitcoin, but also to use its GPU units to drive stable revenues in the high performance computing (HPC) segment, specifically around AI.
- Leader in Bitcoin Mining: We estimate the Company is generating over 9.2 Bitcoin per day, which translates to $331,200 revenue in crypto every day using October spot prices. This is amplified by the high operating efficiency that the Company has of approximately 67.5 BTC mined per EH as of October 2023, among the most efficient BTC/EH in the industry. As of October 31, 2023, the Company had a combined BTC mining hashrate of 3.94 EH/s, comprised of 3.81 EH/s from ASIC Mining and 0.13 EH/s from GPU BTC Mining.
- ESG Oriented: The Company has a green and clean energy focus that includes hydroelectric and geothermal energy that powers its mining facilities. The Company operates green energy-powered data center facilities in Canada, Sweden, and Iceland. Notably, the recent infrastructure upgrades in New Brunswick and Quebec were completed using green, clean, and cheap energy.
- Positioned to Benefit from Price Correction: The Company mines and holds Bitcoin, leading to large revenue swings. There are many secular drivers which support upward bias to spot prices, including a limited supply curve, increased institutional interest, and steady progress in regulatory acceptance for Bitcoin. HIVE is strategically positioned to take advantage of its recent ASIC purchases at attractive prices. We believe a near term catalyst could be if the Fed pivots to a more dovish stance and/or the BlackRock and Fidelity ETFs gain approval from the SEC.
- Valuation: We are valuing HIVE based on our 2024 estimates. Due to price volatility, our assumptions use the trailing 30-day average BTC price of $36,000.
- EV/EBITDA: Applying an EV/EBITDA range of 10.5x to 11.5x, with a midpoint of 11.0x, results in a price range of $2.78 to $3.08, with a midpoint of $2.93.
- EV/Revenues: Applying an EV/Revenue range of 3.0x to 4.0x, with a midpoint of 3.5x, results in a price range of $4.02 to $5.46, with a midpoint of $4.74.
- EV/Exahash: Applying an EV/EH range of 100x to 150x, with a midpoint of 125x, results in a price range of $4.22 to $6.50, with a midpoint of $5.36.
About Stonegate
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.
