Financial services firm Cantor Fitzgerald said the share prices of two crypto mining companies, Riot Platforms and CleanSpark, would grow by 60 percent in 2023 despite the turbulent crypto market conditions last year.
Cantor explained that the bullish trend in Bitcoin — which has gone up by 38 percent since New Year — is responsible for mining companies' gains. As Bitcoin is the most valuable token in the market, other tokens are expected to follow its climb and revitalize the market's sentiment.
Riot is one of the largest crypto mining companies in North America. The company has been focusing on enhancing its Bitcoin mining hash rate and boosting the capacity of its infrastructure in recent years.
At the end of 2021, Riot only recorded 3.1 EH/s self-mining capacity. The figure grew to 9.7 EH/s by the end of last year. Riot recently boosted its deployed machines to 88,556 after making more purchases.
In the first quarter of 2023, Riot aims to achieve a hash rate of 12.5 EH/s by adding a new building and installing new machines in its Rockdale facility. The miner is also in the process of assembling 200 MW of immersion-cooling infrastructure.
The company, which also provides hosting services to other Bitcoin miners, mined 659 BTC last December, up 55 percent compared to the same month in 2021 when it sold 600 units and gained around $10.2 million in sales.
Like many other crypto miners last year, Riot's shares also dropped sharply. However, the shares have increased by 88 percent since December. Cantor head of fintech research Josh Siegler believes that Riot still has more room to grow.
"With scale being paramount in this industry, we are positive on RIOT's ability to mine more Bitcoin than others and reinvest those proceeds to further increase scale," Siegler wrote in a report.
"Gross margin remains best-in-class at ~65%, largely due to unique energy agreements it has entered into."
Siegler added that, unlike other mining companies, Riot would not need to raise extra debt to achieve its revenue guidance. The fintech analyst also pointed out the overweight rating on Riot shares — indicating that investors should "Buy" — and the price would likely hit $12 per share.
Most analysts on Wall Street also rate Riot's shares as "Buy." The shares are trading at around $6.20. Riot is expected to see a 12-month uptrend of 62 percent.
The Nevada-based CleanSpark originally only offered microgrid solutions. The company started to mine crypto at the end of 2020 and now focuses on Bitcoin mining operations.
CleanSpark runs several Bitcoin mining facilities in Atlanta, Georgia. It also contracts miners in Massena, New York. The company promotes itself as a sustainable mining company, using low-carbon energy sources to conduct mining activities.
The company sells a large portion of its mined assets and uses the fund for further development. The strategy helped increase the company's hash rate from 2.1 EH/s in early 2022 to 6.2 EH/s by the end of the year. The company now operates 63,700 mining machines.
Compared to 2021, the company's yield grew by 200 percent last year. CleanSpark reported that it mined 464 Bitcoin last December, adding the total amount mined in 2022 to 4,621 tokens. Of the total tokens mined in that month, CleanSpark sold 517 units and gained approximately $8.7 million.
Recently, the company slashed its target hash rate in 2023 to 16.0 EH/s from 22.4 EH/s. It cited the delay in Lancium's infrastructure development as the reason for the lower target.
Despite that, Siegler said CleanSpark would still be able to achieve an 89 percent annual growth. Wall Street analysts rate CleanSpark shares as a "Strong Buy." With a $7.33 target, the stock may increase by 178 percent by the end of this year.