Summary CleanSpark is a compelling buy due to increased production, reduced mining costs, and a strong Bitcoin treasury, despite recent price volatility. CleanSpark's March production hit a record 706 Bitcoins, with plans to boost capacity by 18% by mid-2025. The company's cost per Bitcoin mined has dropped to $34k, enhancing gross margins and operational efficiency. CleanSpark trades at a modest 4.8x EV/adjusted EBITDA multiple, offering significant upside potential if Bitcoin prices stabilize or rise. The stock market isn't the only asset class that has seen a major relief rally over the past week: cryptocurrencies have joined in on the party too, and as of the time of writing, Bitcoin has rallied back very close to the critical $100k threshold. This upswing benefits crypto miners, which are still shaken by recent price volatility. CleanSpark ( CLSK ), one of the most notable and publicly traded miners, is still down ~5% since January and down ~50% over the past year. The question for investors now is: is CleanSpark overdue its rebound? Data by YCharts I last wrote a bullish note on CleanSpark in January, when the stock was trading higher at ~$10 per share (and when Bitcoin was also trading at similar ~$95k levels). Given price stabilization in the crypto market, plus new operational improvements on CleanSpark's end that are allowing CleanSpark to produce more Bitcoin at a lower cost, I'm reiterating my buy rating on CleanSpark. Increasing capacity, lowering cost Let's start with the obvious: Bitcoin prices are outside of CleanSpark's control, and while the stock will always see correlation with the broader crypto market, investors who have a long-term belief in the durability of Bitcoin's relevance and market value should focus on CleanSpark's operational progress, which is where management is focusing its attention as well. CleanSpark just reported mining results for the month of March, as it does every month. CleanSpark March bitcoin production (CleanSpark March mining update) As shown in the chart above, the company produced 706 Bitcoin (worth $85.2 million, at current prices of $94k per coin). Note that this is the highest monthly production rate for CleanSpark on record. In February, the company had mined 624 Bitcoin; throughout the second half of 2024, the company had averaged between 620-605 Bitcoin per month, so this improvement translates to a ~10% increase in production. The company achieved this by adding a new low-cost facility in Wyoming, adding 2 EH/s (exahash per second, representing one quintillion "hashes" per second, which are computations that Bitcoin mining computers solve to receive blockchain rewards). As shown as well above, the company's total mining capacity is currently 42.4 EH/s, with a target to improve to 50 EH/s (a further 18% improvement) by the end of the first half of 2025. What seemingly gets less credit, however, is the fact that CleanSpark is reducing the cost per coin production as well, effectively improving its "gross margin" per Bitcoin mined. CleanSpark doesn't report mining cost each month alongside production results, but in its most recent quarter (reported February), the company noted that its fiscal Q1 (December quarter) had an average mining cost of "approximately $34,000." That's a significant improvement versus $36,250 in fiscal Q4 (the September quarter), and as long as CleanSpark continues to add mining capacity in low-cost areas such as Wyoming, where land is plentiful and energy is cheap, the company can continue to improve its marginal cost per coin. We note as well that CleanSpark barely sells any Bitcoin (only 14.2 in March at an average price of $87.7k, versus 706 produced), preferring to build up its treasury and selling only as needed to sustain operations. A business with tremendous earnings power CleanSpark is a tough business to value, given the fluctuating price of Bitcoin, its constantly changing production rate, and shifting energy costs. And yet to get a good grounding on what this business is worth, I like to construct a conservative, yet simple P&L around this company's prospects. Let's start with revenue. If we assume the company can continue running at its March production rate of 706 coins, it will produce 8,472 Bitcoins per year, or $796 million in revenue at current prices of $94k/coin. At a cost per coin of $34k, each Bitcoin would produce $60k in gross margin, or $508.3 million in gross margin dollars per year. The final piece is operating expenses. In FY24, the company reported $528.0 million in total costs, which was inclusive of $165.5 million in mining costs which we calculated separately above. CleanSpark opex (CleanSpark Q4'24 earnings release) If we take include only the true operating expenses (professional fees, payroll expense, and G&A expense) - CleanSpark's "pro forma" opex is $118.1 million, with the other costs related to depreciation/amortization and impairment not accounted for in an adjusted EBITDA figure. If we conservatively assume that CleanSpark will grow opex by ~15% in FY25 (which corresponds to its planned EH/s capacity growth through the first half), opex would be $135.8 million. This gives us an approximate adjusted EBITDA of $372.5 million ($508.3 million in gross margin dollars, less $135.8 million in pro forma operating costs excluding depreciation/amortization). This represents 52% y/y growth over $245.8 million in adjusted EBITDA in FY24. Valuation and risks/opportunities to the earnings forecast Despite operating a growing and efficient business with seemingly rich earnings potential, CleanSpark trades at very modest multiples. At current share prices near $9, CleanSpark's market cap is just $2.53 billion. Meanwhile, its latest December balance sheet showed $277.6 million in cash and investments, alongside $648.6 million in debt - or a $371.0 million net debt position. Its enterprise value, excluding the value of its Bitcoin holdings, is $2.90 billion. Of course, as we previously mentioned, CleanSpark is stingy when it comes to selling its mined Bitcoin, and it's sitting on a trove of crypto value. As of its March mining update, the company notes that it has 11,869 coins in its treasury, worth $1.11 billion at current market prices of $94k. This means that CleanSpark's true enterprise value, including the value of its Bitcoin holdings, is $1.79 billion. This means that CleanSpark trades at just a 4.8x EV/adjusted EBITDA multiple, assuming the ~50% y/y growth in adjusted EBITDA as I've laid out above. Of course, the major risk to CleanSpark's earnings power is the price of Bitcoin itself. To take an extreme example of price risk: at the absolute lowest point of the post-tariffs market volatility, Bitcoin briefly dipped to $76k before rallying back above $90k. Bitcoin price history ( coinmarketcap.com ) If prices of Bitcoin stabilize at $76k, assuming no change in mining cost, CleanSpark would shed $18k in gross margin dollars per coin mined, or $152.5 million of risk to adjusted EBITDA - or a ~40% hit to the $372.5 million adjusted EBITDA used as the basis of my valuation. Of course, this downside risk could also be upside risk, if the price of Bitcoin rallies instead of falls. Another major opportunity to this earnings forecast is that we assumed flat production to March (706 coins per month), even though CleanSpark is investing resources into increasing its capacity to 50 EH/s, 18% higher than its current March production run rate. Key takeaways To me, CleanSpark remains a very compelling buy as the company increases its production rate, cuts down on cost per coin mined, and maintains its policy of holding bitcoin for investment - leading to a sizable balance sheet. Investors are rightly nervous about recent price volatility in Bitcoin, which is likely the main cause of CleanSpark's discounted valuation. In my view, however, if you're looking for some exposure to cryptocurrency in your portfolio, this Bitcoin miner is a more solid long-term investment than Bitcoin itself, largely because of the company's track record for increasing production capacity and lowering its marginal cost of mining. Stay long here.
