Some bitcoin miners won’t survive when the upcoming halving slashes their revenue in half, but the ones that do survive will thrive, and Rosenblatt Securities says TeraWulf is its top pick in the category. The firm initiated coverage of the bitcoin miner with a buy rating and $4.20 price target Tuesday. Shares were ahead almost 3% in early trading, bringing the past month’s gain to 14.2%. “WULF is our preferred way to allocate to bitcoin below spot prices, particularly among a not so shareholder-friendly pubco peer set,” Rosenblatt analyst Andrew Bond wrote in a note, referring to publicly-traded miners. “While we expect the industry to shrink following the halving, WULF is built to last with access to industry-leading (nearly zero carbon) power cost and fleet efficiency, vertical integration through sustainable and scalable sites, and a best-in-class management team with the highest levels of insider ownership in the space,” Bond added. WULF BTC.CM= 1Y mountain TeraWulf (WULF) YTD “WULF’s cost to produce a bitcoin is industry best which has led to outsized gross margins well above its peers that trade at higher multiples,” Bond said. Mining stocks like TeraWulf offer amplified exposure to the bitcoin price, with enhanced returns during bull cycles but increased volatility in bear markets. TeraWulf’s estimated cost to mine a bitcoin this year is about $25,000 ahead of the halving and $37,000 after. Bitcoin is currently trading at about $70,500, according to Coin Metrics. The price of bitcoin is one of the biggest considerations for companies that mine the cryptocurrency, since miners earn 6.25 bitcoins for each block of transactions they mine. This reward will be halved in the coming weeks, as mandated by the Bitcoin code. Miners have been hard at work to enhance their fleet efficiency and lower their operating costs — largely power costs. Bond said Maryland-based TeraWulf has quadrupled its self-mining capacity from early 2023 levels and that it has a fixed power cost of $0.02/kWh over the next five years — lower than the U.S. industrial average of nearly $0.08/kWh and the majority of other miners, whose costs are in excess of $0.04/kWh. The analyst also attributed the company’s discounted valuation to a misunderstanding of its debt structure, and its stock liquidity, which has been hampered by a lack of dilution compared to peers. Bond said TeraWulf is positioned to pay down its debt by the second half of the year. “Liquidity follows price, which we believe will move meaningfully higher after the halving as WULF is likely to be one of the only miners that can generate positive” free cash flow, Bond said. —CNBC’s Michael Bloom contributed reporting.
