CleanSpark Inc (NASDAQ: CLSK) has seen its share price dive over the past month, but its Bitcoin mining capabilities appear to be going from strength to strength.
Is the clean Bitcoin mining business a good investment despite serious crypto volatility?
What is CleanSpark?
CleanSpark provides bitcoin mining and energy technology solutions worldwide. It operates in two segments, Digital Currency Mining and Energy.
As the name suggests, the company’s Digital Currency Mining segment engages in mining of Bitcoin. Indeed, CleanSpark boasts that it is America’s leading sustainable Bitcoin miner. It has two owned-and-operated bitcoin mining facilities in Atlanta, Georgia.
Meanwhile, the Energy segment provides some services involving engineering, design and software, custom hardware, open automated demand response, solar and energy storage solutions for microgrids and distributed energy systems.
The company was formerly known as Stratean Inc. and changed its name to CleanSpark, Inc. in November 2016. The business was incorporated in 1987 and is headquartered in Henderson, Nevada.
CLSK Stock Financials
The company’s third quarter earnings saw it report total net revenues of $31.0m, up from $9.1m in the same period one year prior. The vast majority of the company’s revenue came from its digital currency mining operation, which contributed $30.9m in the period.
The proportion of revenue contributed by the business’ other services has declined significantly over the last 12 months.
Total costs and expenses have rocketed too, rising from $21.0m to $46.0m across the same period. As such the business’ operational loss rose from $12.0m to $14.9m.
With a $13.1m loss from discontinued operations on the books too, CleanSpark’s net loss for the period amounted to $29.3m, up from $16.7m.
The business reported that it had cash and cash equivalents of $2.7m at the end of the period. Total current assets amounted to $29.4m.
CLSK’s share price has dropped by more than 75% across the year to date
CLSK Growth Potential
CleanSpark is already mining Bitcoin at a record rate. The company mined 532 of the coins in October, up by 19% from the prior month.
But CleanSpark looks poised to grow significantly beyond this already record mining rate.
The company’s current operational power is 120MW, but its under development, planned or contracted power amounts to 702MW. It is also awaiting the delivery of around 12,400 extra mining machines on top of its existing arsenal of 42,000.
The business also acquired two new sites over the summer months. Together, these sites have additional capacity of 313MW. As such, the company has projected that its hashrate, which is the measure of computational power within its mining network, will grow from 5 EH/s to 22.4 EH/s over the next 12 months.
Of course, the growth of the company’s mining capabilities should ensure revenue growth, assuming that the value of the digital assets being mined remains high…
CLSK Investment Risks
There’s an obvious elephant in the room when examining any crypto-linked investment in the current climate. The price of digital assets like Bitcoin has deteriorated significantly over the last year, falling by nearly 70%.
Most recently, the collapse of major crypto exchange FTX has further shaken investor confidence in digital assets and related stocks.
With almost the entirety of CleanSpark’s revenue coming from its mining activities, the company is extremely exposed to fluctuations in the value of and confidence in cryptocurrencies.
Making these question marks over the viability of crypto investing worse is the financial state of the business. There’s no escaping the fact that the business is running out of money.
CleanSpark has had to resort to more and more desperate measures to fund its operations. For example, May saw the business secure a $35m loan with an annual interest rate of 9.9%, a steep fee.
Such a high interest rate indicates creditors are not thrilled to be backing the business and that it could run out of options in the near future. Additionally, the company may have to resort to diluting shareholders’ interests through releasing a fresh batch of stock.
Is CLSK Stock a Good Investment?
Investing in a crypto mining operation is a huge risk right now. Prices may yet recover, but their inherent volatility and current low ebb alone make CleanSpark an exceedingly risky investment.
Additionally, the company appears to be in some danger of simply running out of money.
That being said, CleanSpark does seem to have some momentum behind it, with impressive revenue and adjusted EBITDA growth over the last year. Additionally, a series of acquisitions have significantly added to its mining capabilities. For investors who do think that crypto will bounce back, CleanSpark could be a good stock do back.
The three analysts listed by Wall Street Journal who cover the stock offer a consensus Buy rating and average target price of $9.33.
