On Sept. 19, Hut 8 announced a major hosting agreement with Bitmain, aiming to generate $125 million annually.

H.C. Wainwright analysts view this move positively as management shifts to offense and carries out a major deal. Under the deal, Hut 8 will deploy up to 15 exahashes per second of Bitmain’s U3S21EXPH ASIC miners by Q2 2025 at its new Texas-based site, according to an H.C. Wainwright release shared with crypto.news. 

Mike Colonnese, H.C. Wainwright’s crypto analyst, anticipate this option could lift Hut 8’s self-mining hash rate from 4.7 EH/s to 19.7 EH/s, solidifying the company’s market position.

Colonnese highlighted the next-generation miners, featuring direct liquid cooling, are expected to triple computing power compared to existing models, offering a significant efficiency boost.

The agreement grants Hut 8 the option to purchase all deployed rigs within six months of activation at a competitive $21 per terahash, allowing the company to scale its self-mining operations. 

“This unique hosting arrangement and miner purchase option structure provides Hut with three key benefits 1) stable, recurring hosting revenues from Bitmain that are not tethered to BTC price fluctuations, 2) the optionality to purchase and immediately convert up to 15 EH/s of the latest gen rigs to the company’s self mining fleet, which had a below average efficiency rating of 31.7 J/TH as of 2Q24, and 3) reduces upfront capital requirements.”

H.C. Wainwright analysts

Stable revenues

This partnership provides Hut 8 with stable, recurring revenues from Bitmain while mitigating Bitcoin (BTC) price volatility. 

Additionally, the custom-built data center design, optimized for high-performance computing, will support up to 180 kilowatts per rack, ensuring operational synergies and future cost savings. With a projected 57% gross margin from this deal, Hut 8 is poised to enhance profitability despite recent Bitcoin price fluctuations.

Hut 8’s stock climbed 3.7% following the news, with market observers expecting further gains as the company completes its expansion. 

The analysts reiterated a “Buy” rating, with a price target of $13.50, highlighting the company’s ability to self-fund the buildout using its $175.5 million cash reserve and 9,105 BTC holdings, valued at $558.2 million​. 

Analysts at H.C. Wainwright & Co. believe that Hut 8 Mining’s stock is now valuable due to some of their strategic advances. 

Hut 8 Mining Corp. received a double upgrade in its rating from “Sell” to “Buy” by analysts at H.C. Wainwright following the release of its second-quarter financial results. The price target was also lifted from $7.50 to $13.50 per share, implying an upside potential of around 23% from current levels, driven by the company’s recent strategic developments.

Hut 8’s positive developments

The upgrade is driven by several positive catalysts, including Hut 8’s success in reducing electricity costs, now at a competitive $0.032/kWh, following the completion of its restructuring program and the energization of a new 63 MW facility in Texas. 

Additionally, the company’s strong liquidity position — $722 million in total, including 9,102 Bitcoin (BTC) — positions it well to capitalize on market opportunities by acquiring and deploying the latest mining equipment.

Moreover, the probability of Hut 8 securing a high-performance computing or artificial intelligence customer has increased after a $150 million investment from Coatue, bolstering the company’s potential for multi-year, high-margin contracts.

Stock declines

Despite a 50% decline in Hut 8’s stock price over the past month, analysts view the current valuation as an attractive entry point for investors, particularly given the company’s potential to nearly triple its operating hash rate by 2025.

As Hut 8 continues to optimize its operations and explore new market opportunities, the recent appointment of Sean Glennan as CFO, effective August 21, is expected to further strengthen the company’s financial strategy.

Hut 8’s Q2 2024 revenue declined 32% quarter-over-quarter to $35.2 million, with a GAAP EPS loss of $0.78 per share.