CleanSpark: Sparking Investor Interest

I am bullish on CleanSpark Inc. (CLSK) because the business has enormous upside potential and the share price looks cheap, based on forward-looking multiples.

CleanSpark Inc. is a clean Bitcoin (BTC-USD) mining and energy technology company based in Nevada. The company, whose mission is to solve the energy challenges of modern times, owns and operates a fleet of Bitcoin miners outside its Atlanta facilities.

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CleanSpark offers software and AI controls for distributed and microgrid energy resource systems, which enable energy users to optimize sustainability and economic productivity. With its cutting-edge software, CleanSpark enables users to scale a microgrid to their specifications and provides wide-ranging applications across commercial, municipal, agricultural, industrial, and defense deployment. The company generates a major portion of its revenue from its energy segment.

Recent Results

CleanSpark announced its third-quarter results on August 15, 2021. The company reported revenue of $11.92 million, a drastic 26.7% below analysts’ estimates of $16.21 million, but up 250% from its $3.4 million revenue in Q3 2020. Its reported losses were $0.49 per share for Q3 2021, as compared to the $0.77 loss per share generated in the previous year. This resulted in a net loss of $16.7 million for Q3 2021, an improvement from the $8.5 million loss generated in the same period of the previous year.

CleanSpark also reported an adjusted EBITDA loss of $3.6 million or $0.11 per share compared to the loss of $1.1 million or 10 cents loss per share in Q3 2020.

By the end of its third quarter of 2021, the business produced over 191 Bitcoins and has produced a total of 598 Bitcoins since it acquired the mining operations in December 2021.

The company announced working capital of $39.9 million as of the end of the quarter ended June 30, 2021, compared to the $2.9 million in Q4 2020 ended September 30, 2021, which is an impressive increase of $37 million within nine months.

CleanSpark expects its earnings to grow in fiscal 2022 from a loss of $0.62 in fiscal 2021 to positive earnings of $0.37 per share.

Valuation Metrics

CleanSpark is difficult to value at the moment, given that it is currently unprofitable and its Bitcoin mining operations tend to be very speculative to begin with. That said, on a forward looking basis, the company is trading at a meager 4.47x EBITDA and 6.69x normalized earnings, which is very cheap for a company with this much growth potential.

Wall Street’s Take

From Wall Street analysts, CleanSpark earns a Moderate Buy analyst consensus based on 2 Buy ratings, 0 Hold ratings, and 0 Sell ratings in the past 3 months. Additionally, the average CleanSpark price target of $42.50 puts the upside potential at 169.2%.

Summary and Conclusions

CleanSpark has immense growth potential, thanks to its AI-powered energy business as well as its investment in Bitcoin mining. That said, it is also very speculative as it has yet to turn a profit and Bitcoin prices can be highly volatile.

However, assuming management can deliver on its projections and become profitable this next year, Bitcoin prices can remain near their current level or go even higher, and the AI-powered energy business can continue to enjoy strong growth, the stock looks very cheap here. In fact, according to Wall Street analysts, it could easily double and beyond from current prices in the very near future if it lives up to its potential.

As a result, I think it could make a good speculative choice for investors here.

Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.

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