CleanSpark's (CLSK 1.86%) stock more than tripled over the past year and outperformed all of its closest Bitcoin (BTC 1.28%) mining peers. Its top competitors, Marathon Digital (MARA 1.34%) and Riot Platforms (RIOT 0.51%), rallied 30% and declined 29%, respectively.
CleanSpark's use of renewable energy to mine Bitcoin, its high growth rates, and its inorganic expansion plans seemed to impress the bulls. But can it stay ahead of its competitors and generate millionaire-maker gains over the next decade?
Image source: Getty Images.
A brief history of CleanSpark
CleanSpark wasn't always a Bitcoin miner. It was founded in 1987 as SmartData, which focused on intellectual-property research and development for alternative fuels before it halted its business operations in 1992. It rebranded itself as Stratean in 2014 and merged with two other companies, CleanSpark and Specialized Energy Solutions, in 2016.
The combined company inherited CleanSpark's catchier brand and focused on developing microgrids, which funnel renewable energy sources, like solar and wind power, into modular storage, backup generators, and load management solutions. These microgrids can be used as stand-alone systems or plugged into a centralized grid to reduce electricity costs.
NASDAQ: CLSK
Key Data Points
CleanSpark subsequently expanded through several smaller acquisitions, but its purchase of the Bitcoin miner ATL Data Centers in May 2021 transformed its entire business model. It upgraded ATL's Bitcoin mining operations with its own microgrids to mine Bitcoin more efficiently and showcase the cost-cutting advantages of its technologies to other Bitcoin miners. It then started to generate most of its revenue from mining and selling Bitcoin.
CleanSpark's energy-efficient approach to mining Bitcoin attracted a lot of interest for three reasons:
- Inflation boosted electricity prices.
- Riot and Marathon were criticized for their usage of coal-fired and fossil fuel plants for mining Bitcoin.
- Bitcoin's halving in April reduced the rewards for mining Bitcoin in half.
How fast is CleanSpark growing?
From fiscal 2021 to fiscal 2023 (which ended last September), CleanSpark's revenue increased at a compound annual growth rate (CAGR) of 85%. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also turned positive, but its net losses are still widening on a generally accepted accounting principles (GAAP) basis.
|
Metric |
FY 2021 |
FY 2022 |
FY 2023 |
|---|---|---|---|
|
Revenue |
$49.4M |
$131.5M |
$168.4M |
|
Adjusted EBITDA |
($3.5M) |
$32.5M |
$25.0M |
|
Net Income |
($22.0M) |
($57.7M) |
($136.7M) |
Data source: CleanSpark.
CleanSpark's GAAP losses are widening because it's aggressively expanding its Bitcoin mining business by installing more miners and acquiring more mining facilities. But that expansion is significantly boosting its hash rate, which gauges the efficiency of its mining operations in exahashes per second (EH/s), and its total Bitcoins mined every year.
|
Metric |
FY 2021 |
FY 2022 |
FY 2023 |
|---|---|---|---|
|
Hash Rate |
1.01 EH/s |
4.16 EH/s |
10 EH/s |
|
Bitcoins Mined |
892 BTC |
3,750 BTC |
6,903 BTC |
Data source: CleanSpark.
By the end of June, CleanSpark's hash rate had more than doubled to 20.4 EH/s as it integrated its latest acquisitions. It recently closed its acquisition of five turnkey sites in Georgia and agreed to buy GRIID Infrastructure in a $155 million all-stock deal to further expand its mining operations. That means it's quickly catching up to Riot and Marathon, which ended June with deployed hash rates of 22 EH/s and 26.3 EH/s, respectively. The usage of its own microgrid technology should also help CleanSpark expand at a more cost-efficient rate than its larger rivals.
For fiscal 2024, analysts expect CleanSpark's revenue to soar 152% to $423.6 million as its adjusted EBITDA surges nearly 12 times to $291.8 million. Based on those expectations, the stock still looks reasonably valued at eight times this year's sales and 12 times adjusted EBITDA. Riot and Marathon, which are both generating slower sales growth, trade at four times and 12 times this year's adjusted EBITDA, respectively.
Can CleanSpark generate millionaire-making gains?
From fiscal 2023 to fiscal 2026, analysts expect CleanSpark's revenue to grow at a compound annual growth rate (CAGR) of 68%. But that rosy outlook is pinned to the price of Bitcoin -- which could either soar or plunge over the next few years.
Assuming the company's valuations remain stable, its sales would need to grow at a CAGR of 26% over a 20-year period to turn a $10,000 investment into $1 million. That isn't impossible when you consider that some big investors expect Bitcoin's price to soar from about $58,000 today to more than $1 million by 2030-2040. CleanSpark's clean-energy foundations should also put it in a more stable position to profit from that expansion than Riot, Marathon, and other Bitcoin miners.
I think it makes more sense to directly buy Bitcoin or a low-fee spot price exchange-traded fund (ETF) than invest in energy-intensive Bitcoin miners. That said, CleanSpark has clear advantages over its bigger industry peers and could generate millionaire-making gains for investors if Bitcoin's price skyrockets over the next few decades.
