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Hut 8 Mining Increases Bitcoin Mining Production; Shares Slip 9%

Story Highlights

Hut 8 Mining increased its bitcoin mining production month-over-month as it continues to hold onto all the bitcoin it mines. Although it also generates recurring  generates revenue from an uncorrelated business segment, it still continues to burn cash.

Hut 8 Mining (TSE: HUT) (HUT) generated 328 bitcoins (BTC-USD) in June, equating to a mining rate of about 10.9 bitcoins per day, an increase from last month’s 309. Despite this, the stock is currently down 9% today.

In total, the company has 7,406 self-mined bitcoins in its reserves. Assuming a price of $20,000 per bitcoin, this equates to $148,120,000 worth of cryptocurrency.

Hut 8 Mining is a cryptocurrency mining company with industrial-scale bitcoin mining operations in Canada. It provides investors with direct exposure to bitcoin without the technical complexity or constraints of purchasing the underlying cryptocurrency.

The company continues to hold onto the bitcoin it mines as it believes in its long-term prospects. Indeed, Hut 8 Mining scaled up its production in June at its North Bay site, and it plans on continuing to do so, going forward.

Also worth noting, Hut 8 Mining operates a high-performance computing business as well, which management states is not correlated to bitcoin or bitcoin mining.

Indeed, it provides the company with monthly recurring revenue and is on pace to increase by 18% in 2022. CEO Jamie Leverton believes that this recurring revenue will allow Hut 8 to successfully navigate the current market conditions.

Analyst Recommendations on Hut 8 Mining

Hut 8 Mining has a Moderate Buy consensus rating based on two Buys assigned in the past three months. The average Hut 8 Mining price target of C$7.16 implies 304.5% upside potential.

Final Thoughts – Increasing Production, but Risks Remain

Investing in Hut 8 Mining is essentially making a bet that the price of bitcoin will rise. Something that may attract investors to Hut 8 Mining is that the stock is currently trading below its book value, with a price-to-book ratio of 0.5x.

Because of this, investors can get exposure to this cryptocurrency stock at a discount to its intrinsic value. Although Hut 8 Mining is increasing its production numbers, investors should note that the company currently burns cash since it stores almost all the bitcoins it mines, and its high-performance computing business doesn’t make up for the costs.

As a result, it has relied on equity financings to fund its operations, which is dilutive to shareholders. In addition, its book value is likely to have decreased thanks to the current market conditions and cash burn. Therefore, investors may prefer to invest in the actual cryptocurrency.


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