Is Bitcoin mining stock CleanSpark (CLSK) a buy ahead of earnings?

August 06, 2024 01:09 AM PDT | By Invezz

Is Bitcoin mining stock CleanSpark (CLSK) a buy ahead of earnings? — Image source: Invezz

Bitcoin mining is under pressure

CleanSpark, and other Bitcoin mining companies, have been struggling to boost Bitcoin production in the past few months. In its most recent production report, the company said that it mined 494 coins in July, an increase from the 445 coins it mined in the previous month.

These numbers were nonetheless, lower than the 806 coins it mined in March this year and the 577 it mined in January. Therefore, the company will need to continue boosting its mining capacity and hope that Bitcoin price will be supportive,

A company like CleanSpark likes higher Bitcoin prices for two main reasons. First, these prices ensure that it sells its coins at a higher price, which is a good thing for margins. This is a similar concept for other mining companies.

Second, CleanSpark holds over 6,500 coins in its balance sheet, making it the fourth biggest BTC holder among mining companies after Marathon, Riot Platforms, and Hut 8 Mining. A higher price is reflected in its balance sheet numbers.

CleanSpark’s business was doing well before the halving event as its revenue and profitability numbers continued. Its annual revenues rose from over $4.5 million in 2019 to $168 million in 2023. The figure was also higher than the $131 million it made a year earlier

CleanSpark earnings ahead

The next big catalyst for the CELH share price will be its upcoming financial results, which will provide more color about its business.

Analysts expect these numbers to show that its revenue for the quarter stood at over $110 million, a big figure considering that its annual revenue in 2023 was over $168 million. This number will nonetheless be lower than the $118 million it made in the first quarter.

Analysts also expect that the company lost 0.04 cents per share in the quarter. For the third quarter, the company’s revenue is expected to come in at $114 million. Analysts expect that its annual revenue will be $423 million this year followed by $839 million in 2025.

However, it is a highly difficult thing to predict CleanSpark and other Bitcoin mining company’s financial results because of BTC’s volatility. On Monday, Bitcoin plunged to $49,000 and has now bounced back to over $56,000.

Bitcoin mining companies are doing several things to boost their revenues. Some of them are diversifying to other coins. Marathon Digital has moved to mining Kaspa, another cryptocurrency that is becoming popular among users.

Other firms are moving to artificial intelligence (AI) industries, where they are using their huge data centers to handle the vast data loads. Just recently, CoreWeave was in talks to acquire Core Scientific, a company that was about to go bankrupt. CoreWeave is a leading company that provides distributed computing solutions to other firms.

Additionally, many of them are moving to acquire existing locations. Last week, CleanSpark announced that it was acquiring the first Bitcoin mining site in Wyoming that will add about 2 exahashes per second (EH/s) to the company. It also bought GRIID Infrastructure in a $155 million deal.

Other companies are considering M&A as a growth strategy. Riot Platforms wanted to acquire Bitfarms, a Canadian Bitcoin mining company that has some of the lowest acquisition costs in the industry. Cipher Mining is also said to be considering a sale.

Bitcoin price action

The other important catalyst for the CleanSpark share price will be Bitcoin’s price action. After plunging to $49,000 on Monday, some analysts believe that it could be about to start another bull run.

As I wrote earlier, the coin has formed a broadening wedge pattern, a popular bullish sign in the market. In most cases, this pattern is usually one of the most bullish ones in the market. Bitcoin has also formed a hammer pattern, another bullish candlestick.

However, because of Bitcoin’s series of lower lows and lower highs, there is a risk that its downtrend could continue. Besides, the coin remains below the 50-day and 200-day Exponential Moving Averages (EMA), meaning that bears are in control.

Bitcoin’s drop below the lower side of the hammer pattern at $49,000 will point to more downside in the next few weeks, with the next level to watch being at $44,000.

If this happens, then it means that CLSK stock price could continue falling as sellers target the key support at $6.35, its lowest point on January 19 and 47% below the current level. A Bitcoin rebound could see it rise to $18.

The post Is Bitcoin mining stock CleanSpark (CLSK) a buy ahead of earnings? appeared first on Invezz

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