Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Business Diversification. Bit Digital is launching a new AI-focused business, Bit Digital AI, that will provide specialized infrastructure to support generative artificial intelligence (AI) workstreams. The new business materially diversifies Bit Digital’s revenue sources with a goal of providing a non-correlated income stream to help offset potential downturns in the core bitcoin mining and ETH staking business.
A Customer Contract. Bit Digital has entered into a binding term sheet with a customer to support their GPU-accelerated workloads. Bit Digital will provide the customer with rental services for a minimum of 1,024 GPUs and a maximum of 4,096 GPUs. The total number of GPUs, contract length, and corresponding unit pricing will be determined upon signing of the master service agreement.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Mining. Bit Digital had a decrease in BTC production in September, producing 130.2 BTC, a 7% decrease compared to the prior month of 133.0. The decrease was primarily driven by an increase in network difficulty and a reduction in active hash rate that occurred towards the end of the month. The active hash rate was approximately 1.19 EH/s as of September 30, 2023, as roughly 600 PH/s of miners went offline due to a power utility mandated maintenance outage from September 26, 2023, to October 6, 2023 with an additional 250 PH/s of miners going offline towards the end of the month following the conclusion of a hosting contract at one facility. The Company is in the process of relocating those miners to alternative hosting sites.
Staking. The Company had approximately 13,594 ETH (13,188 last month) actively staked in native and liquid staking protocols as of September 30, 2023, with 11,200 natively staked and 2,394 ETH deployed in liquid staking protocols. The Company has 512 ETH (16 Nodes) deposited but in queue to be activated on the Ethereum staking network, which are estimated to come online by the end of October 2023. The blended APY for the month was roughly 4.1%.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
August Production. Bit Digital produced 139.9 BTC, a 5% increase compared to the prior month’s 133.0 BTC. The increase was due to a higher average active hash rate, partially offset by an increase in network difficulty. The active hash rate was approximately 2.03 EH/s as of August 31, 2023 compared to 1.78 EH/s last month.
Staking. Bit Digital had approximately 13,188 ETH actively staked in native and liquid staking protocols as of August 31, 2023, up from 12,708 last month. Approximately 10,784 were natively staked and 2,404 ETH were deployed in liquid staking protocols as of that date, with 416 ETH deposited but in queue to be activated on the Ethereum staking network, which are estimated to come online by the end of September 2023. The blended APY the Company earned was 4.4% on its staked ETH position for the month of August 2023.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Transitional Quarter. The second quarter 2023 was a transitional quarter for Bit Digital, with the Company entering new strategic partnerships, exiting certain legacy hosting relationships, diversifying the geographic presence, and executing on growth strategies. The new hosting relationships add approximately 35 MW of additional mining capacity, which Bit Digital will fill with announced new miner purchases.
2Q23 Operating Results. Revenue improved to $9.0 million from $8.2 million in 1Q23 and $6.8 million in the year ago period. Bit Digital reported a net loss of $2.4 million, or a loss of $0.03/sh, compared to a loss of $17.8 million, or a loss of $0.22/sh last year. Adjusted EBITDA was $1.9 million compared to a loss of $12 million in 2Q22. We had projected revenue of $10.8 million, a net loss of $5.0 million, or a loss of $0.06/sh, and breakeven adjusted EBITDA.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Why Growth Companies May Take a Backseat for a While
Most everything runs in cycles; this is especially true for investment trends, investment styles, and investment performance or results. It looks like value investing has been making its long-awaited return to favor. This could be good news for investors that are frightened of the dizzying heights reached by tech’s top performers (the bigger they are, the harder they could fall) and provide an opportunity for those that know stock market history and expect it to repeat its time-tested performance attributes.
Value Versus Growth
It makes sense to quickly define value stocks and growth stocks as there are big differences, even though to the untrained, it may sound like we are talking about the same thing.
Growth stocks are stocks that are expected to outpace the overall market. These stocks are typically priced higher, using metrics we’ll discuss later, than value stocks because investors are willing to pay a premium for the expected future earnings growth. The definition can include large-cap companies still on a high growth trajectory like Apple (AAPL) or Tesla (TSLA), and small-cap companies such as AI company Soundhound (SOUN) or microcap companies like last quarter’s digital mining favorite Bit Digital (BTBT).
Value stocks are those trading for less than their intrinsic value. This means that for any one of a number of reasons, including momentum traders being distracted from value, the stock is priced below what the investor believes it should be worth. Put simply; value investors believe that they can identify stocks that are undervalued because they are not current “favorites” in the market. Large-cap examples could include well-established consumer goods company Proctor and Gamble (PG) as it is stable and growing, but not with great speed, or small-cap digital, television, and audio provider Entravision (EVC). Microcap companies may also be considered value stocks, take for example dry-bulk shipping company, Eurodry (EDRY). While the company has earnings and pays an above-average dividend, the nature of the business does not place its earnings expectations to become a multiple of its current business five or ten years from now.
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The Important History
Going back more than 40 years to the decade of the 1980s value stocks outperformed; the 1990s were led by growth opportunities. Then, in 2000, value investing beat growth for seven consecutive years. From there growth companies dominated through 2021. These are long cycles. In 2020, the year of ample stimulus money and Robinhood trading, growth seemed to have reached a crescendo and may have concluded its outperformance cycle with the strongest leg, beating value by more than 30 percentage points – the widest margin since at least 1927. Then, in 2021 value became the more dominant provider of performance. While trends are best seen in the rearview mirror, it appears that value investing has made and is continuing to make a comeback.
Last year, 2022, value beat growth by almost 25%, that is, using as a benchmark the S&P 500 Growth ETF (IVW) relative to the S&P 500 Value ETF (IVE). Both were down, but growth fell by 29.5% while value dipped by 5.4%.
Those that missed the growth stock go-go part of the cycle can only wish they could turn back time. Instead they must play the cards that are in their hands now. You can’t invest on yesterday’s circumstances. The question now is, has there been an ongoing shift to value, and how far can it go? Will it make up for the many underperforming years?
Are We in a Period of Value Outperformance?
One point already made is that markets and segments of the financial markets run in cycles. That actually lacks a clear definition. Surmising that over a long enough time period, the two will take turns outperforming with value more often, providing higher returns to investors lacks definition and traditional factors for one to outperform.
Over the last decade, low interest rates brought a lot of investors into the stock market. Most of those years investors were highly rewarded. Those with a greater risk tolerance did best which increased the risk appetite across the board. Growth, especially on the technology front, was rapid, during the pandemic. The demand for technology reached a peak and was met with investor cash as factors like stimulus checks, no commission trades, smartphone trading apps, and free time all converged at once. No wonder 2021 was so strong.
Consider this: The Price Earnings Ratio (P/E) of the Nasdaq 100 is 30.25, that is to say the average stock is priced at over 30 times annual earnings. The growth ETF IVW is at 23.5 times earnings. Meanwhile, the P/E of the value ETF IVE is only 20.6 times earnings. If earnings of past high flyers discontinue their growth trajectory either by increased costs such as interest rates or decreased sales partly prompted by the Fed injecting cash into the system, their growth may stall for some time. Investors will have to look for opportunity elsewhere, in other words, find value. The cheaper stocks (lower P/E) are where they have turned in the past, which keeps the two running in cycles.
Take Away
Value had a much better year than growth last year and seems to be in a position to make up for over a decade of lost ground to the riskier growth stocks. A portion of yesterday’s demand may have been met and likely borrowed from today’s demand for products involving communication and technology. For instance, Apple is expected to sell far fewer smartphones this year.
The year 2022 was a wake up call for those involved that became accustomed to making money each time they chased and bought an already expensive stock. These stocks now are competing with certificates of deposit rates at the local bank, and the idea that there is too wide of a gap between growth and value. For those that are long-term investors, they may look at history and decide that stocks, not fixed income, will provide the most return. Using a similar comparison, they may also expect that for growth and value to approach their normal relationship to each other, value will need a few years of significant outperformance or many years of mild outperformance. Either way, value investing is now the easier argument to make.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
July Production. In July, Bit Digital produced 133.0 BTC, up 12% from 119.1 BTC in June. The increase in production was primarily driven by a higher average active hash rate and was partially offset by an increase in network difficulty. The active hash rate was approximately 1.78 EH/s as of the end of the month, flat with the end of June.
Ethereum. The Company had approximately 12,708 ETH actively staked in native and liquid staking protocols as of July 31, 2023, up from 11,716 at the end of the prior month. Approximately 10,304 were natively staked and 2,404 ETH were deployed in liquid staking protocols. Additionally, Bit Digital had 576 ETH deposited but in queue to be activated on the Ethereum staking network. Bit Digital earned a blended APY of approximately 4.5% on its staked ETH position for the month.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
June Production. For June, Bit Digital produced 119.1 BTC, a 5% increase compared to May. The increase in production was primarily driven by a higher average active hash rate and was partially offset by a decrease in transaction fees compared to the prior month. The active hash rate was approximately 1.78 EH/s as of the end of the month.
And Ethereum Too! The Company had approximately 11,716 ETH actively staked in native and liquid staking protocols as of June 30, 2023. Approximately 9,312 were natively staked and 2,404 ETH were deployed in liquid staking protocols. Additionally, Bit Digital had 960 ETH deposited but in queue to be activated on the Ethereum staking network. Bit Digital earned a blended APY of approximately 5% on its staked ETH position for the month.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
With BlackRock filing for a Bitcoin-related ETF this month, and then Citadel, Charles Schwab, and Fidelity backing a cryptocurrency exchange, there is again talk of Bitcoin (BTC) more than retracing its previous all-time high. BlackRock’s proposed product is designed, as are other crypto ETFs, to trade like a stock. This helps satisfy those that want ease of trading, exposure of their qualified retirement money, and all investments on one statement. A consolidated statement is also a benefit of Citadel, Schwab, and Fidelity’s exchange plans.
This adds fuel to the momentum Bitcoin has relative to other assets.
Another reason for increased expectations for Bitcoin’s performance is, next year Bitcoin’s is scheduled to halve, sometimes called its “halving event.” This halving happens every four years as Bitcoin rewards to miners are cut in half (miner’s payout will be reduced to 3.125 BTC). The event is viewed as positive for Bitcoin’s price. This is because halving helps in reducing supply. Historically, halving has brought higher Bitcoin values.
Exposure to Bitcoin price movements are, for some investors, already in their traditional brokerage accounts, and when desired, has found its way into IRA’s and other tax-advantaged retirement accounts. This is accomplished using the strong correlation between Bitcoin mining stocks, and the trend and momentum of Bitcoins measured against US Dollar value (BTCUSD) .
Over the past month as Bitcoin rose more than double that of the S&P 500 as a percentage, many Bitcoin mining stocks crushed the crypto’s performance. Both Bitcoin and Bitcoin miners historically move in the same direction, but the magnitude varies.
Currently, many mining stocks are experiencing a much greater magnitude.
To demonstrate how mining stocks provide stock portfolios the overall direction of Bitcoin, but differ in terms of degree, the chart above plots four Bitcoin mining companies against the BTCUSD. The overall direction is visually correlated to $Dollar/Bitcoin percentage moves. However, there are huge variations in that performance. The top performer represented above is Bit Digital, Inc. (BTBT). The New York-headquartered, large-scale mining business, with operations across the U.S. and Canada also acts as a validator of Ethereum. This is common stock and avoids the contortions and management fees of gaining exposure through an ETF, and of course, can be obtained through an investors traditional stockbroker. While Bit Digital rose 72.22% during the last 30 days, Bitcoin rose near 10%.
The weakest Bitcoin mining company pictured here is Riot. Riot has deployed one of the mining industry’s largest fleets of self-mining hardware. While the period represented above is only the past 30 days, Bitcoin strength is still represented in this laggard.
Take Away
The new possibility that BlackRock gets approval for a Bitcoin ETF and that a consortium of brokerage firms create a crypto exchange, is expected to lead to a growth in demand for cryptocurrency. Investors may be able to capture directional performance of Bitcoin using the stocks of Bitcoin miners, and have these assets listed on their current brokerage holding reports, and even house them in qualified tax-advantaged accounts.
The launch of a Bitcoin ETF could certainly help increase exposure to the token and drive up demand because it makes it easier for consumers to purchase, and crypto exchanges have also come under regulatory scrutiny as of late. If an investor is looking to accomplish this, they may wish to evaluate whether they can meet their needs using Bitcoin mining stocks.
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Initiating Coverage. We are initiating research coverage on Bit Digital, Inc. with an Outperform rating and a $4.50 price target. Bit Digital is an asset-light, sustainability-focused digital asset mining company with mining and staking operations in the US, Canada, and Iceland. We believe the Company provides an opportunity for investors to invest in cryptocurrency mining and staking operations through two blue chip tokens in Bitcoin (BTC) and Ethereum (ETH).
Asset-Light Mining. Bit Digital’s primary revenue source is through BTC mining. The Company manages to keep an asset-light model through multi-year contracts with facilities to host the Company’s miners, enabling Bit Digital to exclusively focus on mining. The Company is currently at a hash rate of 1.2 EH/s with a goal of 2.6 EH/s by the end of 2023. We believe Bit Digital is capable of reaching its goal through increased utilization of the existing fleet as well as various miner purchases.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
