JPMorgan raises price targets on Bitcoin mining stocks

“We previously valued Bitcoin miners based on the four-year gross profit opportunity for each operator,” the analysts said.

“We are expanding upon this framework by incorporating 1) the value of each company’s land and power assets […] and 2) a HODL premium, which gives miners credit for holding Bitcoin on their balance like MicroStrategy.”

MicroStrategy (MSTR), a software company turned de facto Bitcoin fund, trades at a roughly 2.4x multiple to the value of its BTC treasury, the analysts noted.

As of Dec. 10, MSTR had gained nearly 450% year-to-date, outpacing BTC’s 125% gains, according to data from Google Finance.

MicroStrategy owns the world’s largest corporate BTC treasury, worth approximately $40 billion.

It is followed by major Bitcoin miners, including Marathon, Riot and CleanSpark. They hold BTC treasuries worth approximately $3.9 billion, $1.1 billion and $890 million, respectively, according to the Bitcointreasuries.net data service.

Now, dozens of companies are buying BTC in hopes of earning a similar trading premium in the public markets. In total, corporate treasuries hold more than $53 billion in BTC as of Dec. 10, according to Bitcointreasuries.net.

Bitcoin miners have struggled to adapt to the Bitcoin network’s April 20 halving event, which reduced mining rewards from 6.25 BTC to 3.125 BTC per block.

The second quarter of 2024 “was a historic quarter, as Bitcoin miners navigated the 4th Bitcoin halving event, which cut the number of daily coins mined (and all else equal, the daily revenue opportunity) in half, resulting in lower margins and profitability across our coverage universe,” JPMorgan said in an August report.

In response, cash-heavy mining companies like Riot Platforms and CleanSpark “acquired other miners with turn-key facilities to increase near-term hashrate and increase their power pipeline,” JPMorgan said.

The December report further indicated that “Riot has the most valuable power portfolio in our coverage universe, worth ~$1.3bn, by our estimate.”