2 Crypto Stocks Set for Gains; Cantor says buy

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After a tumultuous 2022, impacted by multiple negative developments culminating in the FTX debacle that sent the crypto space into yet another meltdown, 2023 has started with a bang for the industry.

As always, leading the charge, bitcoin has had an excellent rally, up 38% year-to-date. And as usual, other tokens mimicked the behavior of BTC and also forged ahead. Of course, the rally also trickled down to the stock market, with crypto-focused stocks benefiting from the change in sentiment.

In fact, Josh Siegler, the crypto specialist at Cantor, expects the shares of a few BTC miners to offer further upside over the next few months, in the range of 60% or more.

We scoured these tickers in the TipRanks database to see what the rest of the street is doing with Sieglers’ picks. It turns out that Siegler isn’t the only one taking a bullish view here; both boast Strong Buy consensus ratings from the rest of the street. Let’s take a closer look.

Riot Platforms, Inc. (RIOT)

Cantor’s top crypto pick is Riot Platform, one of North America’s largest cryptocurrency mining companies. The company is focused on expanding its operations by increasing its bitcoin mining hash rate and increasing its infrastructure capacity.

The company only had 3.1 PE/s of self-mining capacity at the end of 2021, but that has seriously accelerated in recent months, and Riot saw 2022 with 9.7 PE/s , boosted by the deployment of recent miner purchases which brought its total deployed fleet to 88,556 miners. With further expansion, the company is targeting a hash rate of 12.5 PE/s by the end of the first quarter as the Rockdale, Texas facility adds a new building and the company installs more minors. Riot is also setting up 200MW of immersion cooling infrastructure. Additionally, the company hosts around 200MW of institutional Bitcoin mining customers. Riot recently underwent a rebrand, changing its name from Riot Blockchain to Riot Platforms.

In addition to quarterly results, the company provides monthly updates of its operations. The latest, for December, showed Riot mined 659 BTC, an increase of 55% from December 2021. The company sold 600 BTC, netting around $10.2 million.

Riot shares were completely decimated last year, but are up 88% since December lows. That said, Cantors Josh Siegler thinks they have more wiggle room.

Making RIOT his Crypto Top Pick, Siegler lays out the bull’s case. He writes: As scale is paramount in this industry, we believe in RIOT’s ability to mine more Bitcoin than others and reinvest those profits to further increase scale. Gross margin remains best-in-class at around 65%, largely due to the unique energy deals it has secured. Unlike other miners, RIOT does not need to raise additional debt or equity to achieve its goals.

Siegler doesn’t just write an optimistic outlook; he backs it up with an overweight (i.e. buy) rating on RIOT stock and a price target of $12 that implies a one-year upside potential of 61% from current levels. (To see Sieglers’ list of winners, click here)

Overall, it’s clear that Wall Street agrees with Siegler on RIOT’s future prospects. The 8 recent analyst analyzes include 7 buys and 1 hold, for a strong buy consensus indicative of a bullish outlook. The shares are priced at $6.20 and their average price target of $10.06 implies a 62% upside over 12 months. (See RIOT stock forecast)

CleanSpark, Inc. (CLSK)

The next crypto stock endorsed by Cantor is CleanSpark, another bitcoin miner. That wasn’t always the case with this company, however. CleanSpark was once just a provider of microgrid solutions and only launched its mining operations at the end of 2020. Since then, however, mining activities have become the primary concern, with the company now a full-fledged bitcoin miner.

The company operates its own bitcoin mining facility in Atlanta, Georgia, and co-locates miners in Massena, New York. Although bitcoin mining is known to be extremely energy-intensive, CleanSpark markets itself as a sustainable mining company and primarily exploits renewable or low-carbon energy sources. The company’s capital management policy is to sell a large portion of mined BTC, the proceeds of which are used to fund future growth. This allowed CleanSpark to increase its hashrate from 2.1 PE/s in January 2022 to 6.2 PE/s in December, even in the face of industry difficulties.

According to the company’s recent update, its fleet of 63,700 state-of-the-art bitcoin miners mined 464 bitcoins in December, resulting in annual production of 4,621, representing growth of more than 200%. The company sold 517 bitcoins in December at an average of ~$17,000/BTC, with the sales generating proceeds of ~$8.7 million.

At the same time, the company announced that it was reducing its CY23E hash rate outlook from 22.4 EH/s to 16.0 EH/s, due to delays in infrastructure expansion at Lancium, where CleanSpark has signed an agreement to deploy some of its mining equipment. .

While the result will be less hash rates by the end of the year, Siegler sees the development as a compensating event for the stock.

A target of 16.0 EH/s would further solidify CLSK as one of the largest vertically integrated auto-miners in the industry, the analyst said. However, we believe the company has better foresight and control over the development of its self-operating sites than the co-location infrastructure. Additionally, the company revealed that its new hash rate guidelines only require ~95,000 rigs and ~$70M in CapEx spend. Assuming the rigs can be acquired at ~$15/TH, this would imply that the new cost to hit its target hash rate is around $212.5 million. This compares favorably to our current conservative assumption of approximately $350 million and will likely result in less equity dilution.

CleanSpark shares may have risen 48% since the December low, but Siegler thinks they have a lot more room to manoeuvre. The analyst assigns the stock an overweight (i.e. a buy) as well as a price target of $5. The figure leaves room for one-year returns of 89%.

Two other analysts have recently waded through CLSK’s reviews, and both are equally positive, making the consensus here a strong buy. At $7.33, the average target implies the stock will appreciate 178% over the coming year. (See CleanSpark stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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