Here are mining stocks you shouldn’t miss:
Are you experiencing the post-Bitcoin (BTC-USD) halving blues? Today I’m going to cheer you up with my cryptocurrency pick Hut 8 (NASDAQ:HUT) stock. This stock will certainly bring any Bitcoin bulls back into the game.
Mid-May appears to be a cooling off period for cryptocurrencies. Expectations regarding the Securities and Exchange Commission’s (SEC) approval of a spot Bitcoin exchange-traded fund (ETF) and the Bitcoin halving event in April appear to be fading somewhat.
Moreover, post-halving reality is starting to set in. Bitcoin miners won’t receive the same rewards as before, and investors may wonder whether it’s worth it to buy shares of mining stocks now. However, a closer look at Hut 8’s financials shows that the company should be in good shape despite the decline in mining rewards.
Diverse business, but mainly mining
One of the things I like about Hut 8 is that there is more to the company than just Bitcoin mining. In fact, some of Hut 8’s revenue comes from managed services and high-performance computing (colocation and cloud).
But let’s not joke. The majority of Hut 8’s revenue comes from its digital asset mining business. As a result, this is a business segment you’ll need to watch closely if you’re evaluating Hut 8.
Let’s see where the data takes us. In the first quarter, revenue from Hut 8’s digital asset mining segment soared to $30.357 million, compared to $7.646 million in the same quarter last year. By my calculations, that’s a 297% increase.
However, it is also important to look at a company’s cost of revenue. Accordingly, Hut 8’s cost of revenue from digital asset mining expanded from $6.079 million in the same period last year to $16.622 million in the first quarter of 2024. In other words, the company is demonstrating the old principle that it takes money to make money.
This principle also applies to all of Hut 8’s business. The company’s total revenue increased to $51.741 million in the first quarter of 2024 from $15.647 million in the year-ago quarter. However, over the same period, Hut 8’s total cost of revenue increased from $8.507 million to $28.147 million.
The reason I mention all this is because Hut 8 CEO Asher Genoot touted the company’s “restructuring program” that began in the first quarter.
“We closed the underperforming Drumheller site, retired inefficient miners, began relocating our equipment from hosted to owned facilities, and began implementing proprietary energy-saving software across our sites. ”
Everything is fine. However, it remains to be seen when these cost efficiencies will show up in the company’s financial results. We hope Hut 8 can show better cost savings in the coming quarters.
Hut 8’s Amazing Profit Statistics
I’ve been a little harsh on Hut 8, but there’s no denying that revenue growth has been notable. The same can be said about the company’s net profit statistics for the first quarter of 2024.
Hut 8 increased its adjusted EBITDA by 2576% to $297 million in the first quarter of 2024 from $11.1 million in the year-ago quarter. Over the same period, Hut 8’s net profit also increased by 1,350% from $17.3 million. $250.9 million.
Of course, there were unusual events in the first quarter of this year, such as the price of Bitcoin rising from $45,000 to $70,000. One could also assume that the impact of April’s Bitcoin halving event on mining rewards did not affect Hut 8 during the first quarter.
Still, even if the company’s Bitcoin mining rewards were halved, its fast-growing revenues could more than offset it. Again, it would be helpful if Hut 8 included spending.
Let’s normalize the market
Because the first quarter was so unusual for the cryptocurrency market, Hut 8 stock investors shouldn’t expect the same level of excitement in the second, third, and fourth quarters. You also shouldn’t expect the same revenue and income growth rates Hut 8 showed in the first quarter.
Cryptocurrency markets should normalize in the next quarter, which is not necessarily a bad thing. Please consider that the price discovery process for HUT stock may take time. Until then, volatility is expected.
So loading Hut 8 stock into your boat is not a good idea. Instead, if you are very bullish on Bitcoin, buying a few shares of Hut 8 would be a prudent policy. With this strategy, you’ll be investing in profitable businesses with compelling growth stories, and if your position size is small, you’ll have room to add more later if you want.
