Is This the Best Bitcoin Mining Stock to Buy Now?

Is This the Best Bitcoin Mining Stock to Buy Now?

The Bitcoin crash has weighed heavily on the stocks of companies whose business is mining the flagship cryptocurrency. Hut 8 Mining (HUT) is a major Bitcoin miner. Its stock has plunged more than 50% year-to-date to trade under $4. The Bitcoin price is 47% off its peak and 21% down year-to-date. 

Considering Hut 8’s business prospects and the crypto industry outlook, the stock seems massively undervalued. There are many reasons to believe HUT stock will not stay this low for a long time. 

What Exactly Does Hut 8 Do and How Does It Make Money?

Hut 8 is a Canada-based technology company. Its primary business is mining cryptocurrencies. It has mostly focused on mining Bitcoin and Ethereum, the two largest cryptocurrencies. Hut 8 competes in this business with companies like Riot Blockchain (RIOT), Marathon Digital (MARA), and Bitfarms (BITF). The company keeps the majority of the crypto it mines in what it calls a “hold on for dear life” (HODL) strategy, but sells some to generate revenue. 

In addition to crypto mining, Hut 8 also provides cloud computing solutions. Its customer base spans conventional businesses and blockchain enterprises, such as startups building Web3 products. The customers pay Hut 8 to use its cloud hosting service.

What Does the Future Hold for Hut 8?

Building capacity has been a major focus for Hut 8 since it sees strong demand for its work. It is adding both crypto mining and cloud hosting capacity. In January 2022, Hut 8 acquired TeraGo’s datacenter business, a portfolio of five facilities across Canada, in a major expansion of its computing capacity.

It acquired the datacenter facilities together with about 400 commercial customers, meaning the deal could start generating revenue for Hut 8 immediately. As Hut 8 expands its computing capacity, it can serve more hosting customers and have more space for crypto mining.

In March 2022, Hut 8 entered into a strategic arrangement with Enthusiast Gaming (EGLX), a Canadian media platform that serves videogame and e-sport fans. The partnership includes Enthusiast Gaming signing up as Hut 8’s cloud customer. Additionally, Hut 8 will use Enthusiast Gaming’s platform to market itself.

Why Should You Care About HUT Stock?

With 6,460 Bitcoins in reserve, Hut 8 is one of the companies with the largest Bitcoin holdings. Worries about the Fed’s actions reducing liquidity in the markets have been a major factor behind the crypto crash that has knocked down Bitcoin. However, Bitcoin’s outlook remains bullish in the long term. 

For example, Cathie Wood of ARK Invest predicts that Bitcoin’s price could exceed $500,000 by 2026 and hit $1 million by 2030. The increasing adoption of Bitcoin as an investment by hedge funds is a major factor behind Wood’s bullish prediction. 

Away from investments, Bitcoin’s adoption as a payment is also growing as more businesses work to expand checkout options for their customers. Bitcoin’s limited supply means that the more adoption increases, the more valuable it can become over time. Therefore, Hut 8 can make a killing from its massive Bitcoin reserve.

Hut 8 has more opportunities beyond Bitcoin. It also mines Ethereum. While Ethereum mining would eventually become obsolete as a result of the shift to the proof-of-stake mechanism, Hut 8’s infrastructure allows it to participate in the economies of multiple cryptocurrencies. For example, for cryptocurrencies that do not require mining, Hut 8 can provide node support.

Another Hut 8 appeal is its diversified business. Cryptocurrency prices are hardly stable. In times of unfavorable price swings in the crypto market, Hut 8 can rely on its hosting business to generate revenue and provide cash for investments and expansion.

Wall Street’s Take

Consensus among analysts is a Strong Buy based on five Buys. The average Hut 8 Mining price target stands at $12.27 and implies upside potential of 247.48% to current levels. 

Stock Investors

At the time of writing, TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Hut 8 Mining, with 5.9% of portfolios tracked by TipRanks increasing their exposure to HUT stock over the past 30 days.

Final Thought

Hut 8 stock provides investors an opportunity to get exposure to Bitcoin and a variety of other cryptocurrencies. At the same time, it is a cloud play. Amid the digital transformation taking place at companies across the board, demand for cloud services is continuing to rise. Hut 8 is well-positioned to take advantage of the demand, especially in the Web3 sector. Finally, Hut 8 is likely to be a major target when the rush to find undervalued crypto stocks begins after the current market uncertainty wanes. 

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