Within the midst of Bitcoin’s rally, many traders are looking for Bitcoin mining shares that is also set to rally. For instance, Microstrategy (Nasdaq: $MSTR) has surged almost 600% over the previous yr – primarily due to how a lot BTC the corporate owns. With that in thoughts, I’ve been on the hunt for different Bitcoin-centric firms, a search that introduced me to HIVE Digital Applied sciences (Nasdaq: HIVE). Regardless of proudly owning numerous BTC, HIVE inventory is down 25% up to now this yr. However, is that about to vary? Let’s study.

Who’s HIVE Applied sciences?

HIVE Applied sciences is an power firm that gives computing energy for each Bitcoin mining and synthetic intelligence. The corporate primarily focuses totally on inexperienced power options (hydroelectric energy) in politically steady nations like Canada, Sweden, and Iceland.To get a greater understanding of whether or not or not you can purchase HIVE inventory, I dove into the corporate’s monetary statements.

HIVE’s Final 3 quarters

Right here is how HIVE has carried out over the past three quarters: 

Income: $31.25 million (+118% yearly)
Internet Earnings: $-6.95 million (+92% yearly)

Income: $22.77 million (-23% yearly)
Internet Earnings: $-24.55 (+27% yearly)

Income: $23.57 million (-46% yearly)
Internet Earnings: $-16.25 million (+88% yearly)

Instantly, we will see that income is rising pretty constantly on a month-to-month foundation, leaping from $23.57m to $31.25m over the course of the yr. On an annual foundation, HIVE’s income dropped from $211.18m in 2022 to only $106.32m in 2023. Not good. However, income isn’t the primary focus for a corporation like HIVE. HIVE is a Bitcoin miner that owns a major quantity of BTC. So, as BTC’s worth will increase, so will HIVE’s worth. To learn how a lot BTC HIVE owns, I dug by way of its most up-to-date investor presentation. 

HIVE reported roughly 2,131 BTC on its stability sheet as of Feb 2024. With BTC’s worth 

hovering round $70,000, which means HIVE’s holdings are price roughly $149,170,000. 

Listed below are a number of different takeaways from HIVE’s presentation:

HIVE mined 801 Bitcoin in Q2 2024
HIVE mines round 9 Bitcoin per day
Low shareholder dilution: HIVE ranks the bottom amongst different bitcoin miners like Riot (Nasdaq: RIOT) or Argo (Nasdaq: ARBK) when it comes to how a lot it dilutes the worth of shares over time. The identical goes for administrative bills.
HIVE maintained a constructive working margin throughout BTC’s final bear market.

The Worth of HIVE’s BTC 

Some fast math reveals that HIVE mines roughly $630,000 price of Bitcoin day-after-day (9 BTC per day at $70,000 per coin). That is roughly 270 cash per thirty days, for a worth of $18,900,000 per thirty days or $56,700,000 per quarter. 

However, HIVE doesn’t earn a 100% revenue on the BTC that it mines. HIVE pays roughly $22,607 per BTC that it produces. So, if HIVE mines roughly 800 BTC per quarter then it should pay a complete of $18,085,600. In complete, HIVE can anticipate to earn $38.61 million every quarter in BTC worth ($56,700,000 price of BTC – $18,085,600 in bills).

HIVE’s market capitalization is presently near $500m, which appears fairly low contemplating its income and the worth of its BTC holdings. If the worth of BTC stays constant at $70,000 then HIVE will mine one other $115.83m price of BTC this yr (Because it’s already April, I’m solely counting three extra quarters).

This $115.83m, mixed with its present holdings of $149.17m, signifies that HIVE may have near $265m in BTC holdings alone by the tip of the yr – roughly half of its present market cap.

In fact, this assumes that BTC’s worth stays the identical over the approaching yr – which is a daring assumption. BTC’s worth might simply slide again right down to $30,000, which is the place it sat for many of 2023. However, BTC’s worth might simply double within the coming yr. This may trigger HIVE’s holdings to skyrocket.

Why is HIVE Inventory Down?

One factor that I discovered attention-grabbing about HIVE inventory is that its worth has fallen considerably throughout a Bitcoin rally. This appears contradictory. Normally, the shares of Bitcoin-centric firms will rise (or fall) in tandem with Bitcoin’s worth. Up to now by way of 2024, Bitcoin is up almost 60%. Bitcoin-centric firms like MicroStrategy and Coinbase (COIN) are up 175% and 77%, respectively. However, HIVE inventory is down over 25%. What’s happening there? 

I did a number of digging attempting to reply this query. However, I couldn’t actually provide you with something tangible. Even Yahoo Finance put collectively an article on why HIVE inventory is tumbling. However, it didn’t say something concrete.

My finest guess could be that the market simply tends to undervalue the worth of BTC when firms maintain it on their stability sheet. This goes for many firms that purchase BTC. However, it appears to be very true for smaller cap firms, like HIVE. 

The market probably views HIVE as a mining firm whose income is rising modestly and has valued it appropriately. However, the market is failing to cost within the worth of HIVE’s BTC holdings – which ought to be price roughly half of the corporate’s market cap by year-end. One factor is for certain: the market by no means assumes that BTC’s worth will rise over the long term…which it has a robust historical past of doing.

Ought to You Purchase HIVE Inventory?

It could be price shopping for HIVE inventory because the worth of its BTC holdings seems to be undervalued by the market. Plus, shopping for extra Bitcoin is certainly a part of HIVE’s technique shifting ahead. HIVE’s Govt Chairman, Frank Holmes lately needed to say:

“This persevering with improve aligns with the Firm’s technique to try to HODL, anticipating heightened demand for Bitcoin as a result of adoption of Bitcoin as a substitute asset class as witnessed with beautiful fund flows into the latest launching of Bitcoin ETFs. We consider as we method the Halving occasion in April, the short-term volatility will stay excessive, and traders should be conscious that HIVE like our friends are often correlated with Bitcoin however with a larger amplitude in worth volatility.”

In different phrases, the corporate is bullish on BTC, so it plans to purchase/mine extra BTC. 

That mentioned, when you’re bullish on Bitcoin then I’d truthfully simply advocate shopping for BTC as an alternative of HIVE inventory. There could be an funding thesis the place the worth of HIVE inventory’s BTC holdings is undervalued. However, the better solution to play that is to only purchase BTC, as an alternative of ready for HIVE inventory to comply with BTC’s actions.

Disclaimer: This text is for common informational and academic functions solely. It shouldn’t be construed as monetary recommendation because the writer, Ted Stavetski, is just not a monetary advisor.