JPMorgan Raises Price Targets for Bitcoin Mining Stocks Amid "HODL Premium" and Power Acquisitions

In a recent report shared with Cointelegraph on December 10, analysts from JPMorgan have raised price targets for four major Bitcoin (BTC) mining stocks, reflecting the growing value of their Bitcoin holdings and power assets. The report, authored by analysts Reginald Smith and Charles Pearce, upgraded the price targets for Marathon Digital Holdings (MARA), CleanSpark (CLSK), Riot Platforms (RIOT), and IREN (IREN). These mining stocks are now trading near or above their newly revised price targets.

Incorporating Power and Bitcoin Holdings into Valuations

JPMorgan’s revised outlook goes beyond just the traditional valuation models based on gross profit potential. The analysts have expanded their framework to factor in two key elements:

• 1. The value of each company's land and power assets.

• 2. A "HODL premium," which gives credit to miners for holding Bitcoin on their balance sheets, similar to how MicroStrategy (MSTR) has been valued in the market.

MicroStrategy, the software company that has evolved into a prominent Bitcoin holder, is a prime example of the impact that Bitcoin holdings can have on stock valuation. The analysts noted that MicroStrategy trades at about a 2.4x multiple relative to the value of its Bitcoin treasury, which has grown to around $40 billion. As of December 10, MicroStrategy's stock had gained nearly 450% year-to-date, significantly outpacing Bitcoin’s 125% gain during the same period.

In comparison, Bitcoin miners like Marathon, Riot, and CleanSpark are also building substantial Bitcoin treasuries. Marathon holds approximately $3.9 billion in Bitcoin, Riot holds around $1.1 billion, and CleanSpark has accumulated $890 million in BTC, according to Bitcointreasuries.net.

JPMorgan's analysis suggests that many companies in the crypto and blockchain sectors are now investing in Bitcoin, hoping to replicate the market premium enjoyed by MicroStrategy and other early adopters. As of December 10, corporate treasuries globally held more than $53 billion worth of Bitcoin, according to Bitcointreasuries.net.

Adapting to the Halving and Power Acquisitions

Bitcoin miners have faced significant challenges due to the Bitcoin network’s halving event in April 2020, which reduced mining rewards from 6.25 BTC to 3.125 BTC per block. The second quarter of 2024 is expected to see similar challenges, with lower margins and profitability as miners adapt to the ongoing impact of the halving.

In response to these pressures, cash-rich mining companies like Riot Platforms and CleanSpark have pursued strategic acquisitions to boost their mining capabilities. These companies have acquired other miners with turn-key facilities to increase their hash rate and strengthen their power portfolios. Riot, in particular, has been aggressive in expanding its power assets, with JPMorgan estimating the value of Riot’s power portfolio at approximately $1.3 billion.

These strategic moves are designed to help Bitcoin miners maintain profitability and adapt to the changing dynamics of the network, especially with the halving reducing the number of coins mined daily.

Conclusion

JPMorgan’s report highlights the growing significance of Bitcoin holdings and power assets in the valuation of mining companies. By incorporating these factors, analysts have raised their price targets for several leading Bitcoin mining stocks. The rise of the "HODL premium" seen in companies like MicroStrategy has now extended to miners like Marathon, Riot, and CleanSpark, reflecting the broader trend of Bitcoin accumulation among corporate treasuries.

As Bitcoin miners continue to adapt to the challenges posed by halving events and market volatility, the value of their Bitcoin holdings and power assets will likely remain a key determinant of their stock valuations. With institutional interest in Bitcoin mining on the rise, these companies are well-positioned to benefit from both the appreciation of Bitcoin and their growing power portfolios in the years to come.