Bitcoin is soaring again. Having piled on the gains throughout 2023, 2024 has continued in much the same fashion. The leading crypto asset has smashed through the $62,000 mark, bringing it within touching distance of the all-time high of $68,789.63 seen in November 2021.
While the Bitcoin halving event – which occurs roughly every four years and is when the bitcoin mining rewards are slashed in half – is due to take place in April and has historically been a big catalyst, acting as the opening shot for a bull market, this time around there has been another big event driving the surge pre-halving – the recent approval of spot Bitcoin ETFs.
Bitcoin evangelist Michael Saylor says these have created an avenue for institutional funds to enter the Bitcoin ecosystem, with demand outstripping the existing supply.
“This is a rising tide; it’s gonna lift all boats,” the MicroStrategy co-founder and chairman recently said in a Bloomberg interview. “If you look at what the spot ETFs are doing, they’re facilitating the digital transformation of capital. And every day, hundreds of millions of dollars of capital is flowing from the traditional analog ecosystem into the digital economy.”
But buying Bitcoin, whether directly or via an ETF, is not the only way to get exposure to the asset. Whenever Bitcoin goes on one of its rampages, it takes stocks operating in the ecosystem along for the ride. With this in mind, we opened the TipRanks database to dig up the details on two bitcoin-driven stocks to take advantage of the ongoing rally. Here are the details.
MicroStrategy (MSTR)
Bitcoin is up by 170% over the past year and those are some tidy gains for sure, but over the same timeframe, shares of Michael Saylor’s MicroStrategy are up by a rather more impressive 273%, showing that it might be more financially rewarding to just lean into the names set to benefit the most from Bitcoin’s rise.
And no company represents a better Bitcoin play than MicroStrategy. It seems rather odd now, but back in 2013, Saylor predicted Bitcoin’s demise, comparing it to online gambling. That was a prevalent view at the time but how times – and Saylor – have changed. Saylor has practically become Bitcoin’s biggest proponent and has made buying as much BTC as possible MicroStrategy’s main priority.
The company used to be solely a business intelligence firm, specializing in providing software and services for business analytics, mobile software, and cloud-based services. But now most of its value proposition is derived from its Bitcoin position. Saylor has famously stated that he’s “going to be buying the top forever,” and his firm has regularly been gobbling up the Bitcoin supply.
Most recently, between February 15 and 25, the firm bought another ~3,000 bitcoins for ~$155.4 million, acquired at an average price of $51,800 each. MicroStrategy’s total Bitcoin holdings now stand at 193,000 coins, purchased at an average price of $31,500 each and currently worth ~$12 billion.
The investment case here is pretty straightforward, according to Benchmark analyst Mark Palmer. “MSTR offers a unique business model focused on the acquisition and holding of bitcoins, which represent the bulk of the company’s valuation, with its software business serving in a supporting role as ballast to that valuation and a generator of cash flow used for the purchase of additional bitcoins,” the analyst explained. “Among MSTR shares’ several points of difference versus ETFs are its ability to acquire bitcoin using proceeds from debt and equity issuances (over $5.3bn raised since 2020) and free cash flow from its software business, the options ladder on the stock that provides traders with the ability to hedge their positions and/or sell volatility, and the stock’s marginability.”
Two other analysts have also recently chimed in with MSTR reviews, and both are positive, making the consensus view here a Strong Buy. (See MSTR stock forecast)
HIVE Digital Technologies (HIVE)
Another way of gaining exposure to BTC is via Bitcoin mining companies. Mining refers to the process by which new bitcoins are created and transactions are validated on the bitcoin network through solving complex mathematical puzzles using specialized computer hardware.
One firm involved in such endeavors is HIVE Digital Technologies, which initially focused on mining Ethereum with GPUs – becoming the first publicly traded cryptocurrency miner in 2017 – before expanding into Bitcoin mining in 2020. Bitcoin mining being famously energy-intensive, the company adheres to ESG practices and employs green energy in its Bitcoin mining operations. Leveraging cost-effective power and renewable energy sources, it conducts mining activities across Canada, Iceland, and Sweden. Similar to Saylor’s strategy, while it periodically sells its mined Bitcoin, HIVE also practices HODLing – keeping a war chest of BTC.
As of the end of January, its HODL position stood at 1,939 BTC, having mined 234.6 bitcoins during the month, marking a 14% increase over the December haul. During FQ3 (December quarter), the company mined 830 bitcoins and generated revenue of $31.3 million, representing a 37.3% sequential increase and beating the forecast by $3.85 million.
HIVE also has exposure to the current hot trend – AI. The GPUs originally purchased to mine Ethereum have now been converted to be used for HPC/AI, with the GPU powered AI business unit generating revenue of more than $5 million on an annualized run rate as of the end of last year.
This diverse approach partly informs Canaccord analyst Joseph Vafi’s bullish thesis. Following the latest print, he wrote, “HIVE continued to execute nicely across multiple fronts… Profitability metrics in the quarter were boosted by an increase to BTC spot prices along with continued gains in mining fleet efficiency offset somewhat by increased network difficulty. We view HIVE’s fleet as one of the most efficient across the sector. Overall, the company has reached ~4EH/s of production capacity. The company’s balance sheet also remains strong.”
“Management also indicated steady progress in diversifying the business via entry into the HPC/AI hosting market,” the 5-star analyst went on to add regarding the new approach. “At a high level, we believe HPC/AI hosting will provide higher returns on electricity input costs and provide a revenue segment that is generally characterized by higher valuations versus BTC mining. At the same time, HPC/AI hosting is also characterized by higher capex requirements versus BTC mining.”
Overall, there are two other reviews of file for HIVE, split into 1 Buy and Hold, each, all culminating in a Moderate Buy consensus rating. (See HIVE stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
