CleanSpark (NASDAQ:CLSK) is a Bitcoin (BTC-USD) mining company that I believe is undervalued at its current price. The stock has outperformed both the S&P 500 (SPY) and NASDAQ 100 (QQQ) by a wide margin, with shares up 138% year-to-date. CleanSpark operates in the same industry as Marathon Digital Holdings (MARA), but has been aggressively stacking Bitcoin while Marathon Digital has reduced its holdings. Led by Co-founder and CEO Zachary Bradford, CleanSpark is a founder-led crypto company that could surprise investors during the upcoming crypto bull run.
CleanSpark owns 100% of its Bitcoin mining facilities in Georgia and co-owns another facility in New York. While Bitcoin mining stocks may experience a near-term selloff due to the Bitcoin spot ETF runup, this would make CLSK shares even more attractive. In Q3 2023, CleanSpark achieved key milestones and plans to expand its Bitcoin mining hash rate to 16 EH/s over the next few quarters. The company reported record revenue of $45.5 million, tripled its hash rate year over year to 9 EH/s, and reduced its net losses. CleanSpark finished Q3 2023 with 1,200 BTC on its balance sheet and $90 million in cash. The company provides monthly updates on its mining operations and has surpassed the 10 EH/s milestone with almost 89,000 operational Bitcoin miners deployed.
I am bullish on CleanSpark stock because the potential of the Bitcoin mining industry is often misunderstood. While small-cap companies like CleanSpark may get ignored by larger, more profitable companies, they have significant upside potential at a relatively low valuation. If CleanSpark scales its production to 16 EH/s, I expect mining production to increase around 60%, generating significant revenue. Additionally, the upcoming April 2024 Bitcoin halving event could lead to a supply shock and a surge in Bitcoin prices, benefiting CleanSpark.
However, there are some risk factors to consider, such as decreasing Bitcoin prices, lack of capital to fund hash rate growth, selling Bitcoin to fund growth, and rising short interest. Despite these risks, I plan to continue holding CLSK shares and buying more leading up to the April 2024 halving. I aim to accumulate shares and sell covered calls to generate income while waiting for the bull run to start. CLSK stock may experience dips in the short term but should continue rising over the next few quarters. The crypto bull run is expected to end around 500 days after the Bitcoin halving event, so CLSK shares could peak around September 2025. Overall, CleanSpark is a relatively cheap crypto penny stock with significant upside potential in my opinion.
Source link
