In a recent report shared with Cointelegraph, analysts at JPMorgan have revised their price targets for four prominent Bitcoin (BTC) mining stocks. The upgrades reflect the value of the miners’ electrical power assets and BTC holdings, which are now being considered in addition to traditional profitability metrics.
Mining Stocks with Revised Price Targets
The four mining operations that will see an increase in their price targets are:
- MARA Holdings (MARA)
- CleanSpark (CLSK)
- Riot Platforms (RIOT)
- IREN (IREN)
According to the report, written by analysts Reginald Smith and Charles Pearce, each stock is already trading near or above its revised price target.
Incorporating Power Assets and HODL Premiums
The JPMorgan analysts explained their methodology for revising the price targets: "We previously valued Bitcoin miners based on the four-year gross profit opportunity for each operator. We are expanding upon this framework by incorporating 1) the value of each company’s land and power assets, including its utility-scale solar projects and existing contracts with utilities and industrial customers; and 2) a HODL premium, which gives miners credit for holding Bitcoin on their balance sheet like MicroStrategy."
The Importance of HODL Premiums
As discussed in the report, MicroStrategy, a software company turned de facto Bitcoin fund, trades at a roughly 2.4x multiple to the value of its BTC treasury. This phenomenon is referred to as a "HODL premium," where companies are rewarded for holding onto their BTC instead of selling it.
MicroStrategy’s Impact on Corporate Treasuries
As of December 10, MicroStrategy had gained nearly 450% year-to-date, outpacing BTC’s 125% gains. The company holds the world’s largest corporate BTC treasury, worth approximately $40 billion.
Other major Bitcoin miners, including Marathon, Riot, and CleanSpark, hold treasuries worth approximately $3.9 billion, $1.1 billion, and $890 million, respectively. According to data from Bitcointreasuries.net, corporate treasuries now hold more than $53 billion in BTC as of December 10.
The Rise of Corporate Treasuries
Dozens of companies are buying BTC in hopes of earning a similar trading premium in the public markets. This trend is driven by the potential for long-term appreciation and diversification benefits that Bitcoin offers.
Power Acquisitions: A Response to the Halving Event
Bitcoin miners have faced significant challenges since the April 20 halving event, which reduced mining rewards from 6.25 BTC to 3.125 BTC per block. In response, some companies like Riot Platforms and CleanSpark acquired other miners with turn-key facilities to increase near-term hashrate and expand their power pipeline.
The Value of Power Assets
According to the JPMorgan report, "Riot has the most valuable power portfolio in our coverage universe, worth ~$1.3bn, by our estimate." This highlights the importance of considering the value of power assets when evaluating Bitcoin mining stocks.
Conclusion
JPMorgan’s revised price targets for four prominent Bitcoin mining stocks reflect a shift towards incorporating the value of power assets and HODL premiums into traditional profitability metrics. As corporate treasuries continue to grow, more companies are buying BTC in hopes of earning similar trading premiums. The importance of power acquisitions and the value of power assets cannot be overstated, as they play a crucial role in determining the long-term success of Bitcoin mining operations.
References
- JPMorgan report: "Bitcoin Miners’ Power Assets & HODL Premiums"
- Bitcointreasuries.net data service
- Google Finance data
