CleanSpark Inc

CleanSpark, Inc. (NASDAQ: CLSK) is a bitcoin mining company. The Company independently owns and operates approximately eight data centers in Georgia for a total developed capacity of 230 megawatts (MW). The Company is engaged in developing an additional 150 MW at its data center in Sandersville, Georgia. It does not host miners for any other companies, and has a partner in Massena, New York, who hosts approximately 50 MW for the Company.

Recent Business and Financial Updates

• Revenue Growth and Financial Performance: For the third quarter of fiscal year 2024, CleanSpark, Inc. recorded a revenue of USD 104.1 million, representing a significant year-over-year increase of 129% from the prior year’s revenue of USD 45.5 million. Despite this strong revenue growth, the company reported a net loss of USD 236.2 million, or USD 1.03 loss per share, compared to a net loss of USD 14.1 million, or USD 0.12 loss per share in the same period last year. The decrease in adjusted EBITDA to USD (12.7) million, down by USD 26.0 million from the previous year’s positive USD 13.3 million, further reflects the financial challenges the company faced during this period.
• Hashrate Expansion and Operational Efficiency: CleanSpark experienced a notable expansion in its operations, with its current hashrate surpassing 22 EH/s, marking a 24% increase in the quarter and a 21% improvement in efficiency year-to-date. This expansion was accompanied by the company's strategic moves into two new states, Tennessee and Wyoming. According to Zach Bradford, CEO of CleanSpark, this growth underscores the company’s commitment to maximizing the efficiency of its mining operations through the replacement of a significant portion of its fleet before their originally expected life cycle, despite the resulting non-cash expenses affecting quarterly results.
• Strategic Fleet Upgrades: The decision to upgrade CleanSpark’s fleet was aimed at ensuring long-term operational efficiency and profitability. The company replaced older, less efficient miners to improve the performance of its deployed fleet, which, although leading to a non-cash impairment for the quarter, is expected to better position the company for future growth. CleanSpark is regarded as one of the most efficient publicly traded Bitcoin miners, according to independent third-party sources, a fact that the company attributes to its strategic focus on fleet optimization and operational effectiveness.
• Impact of Bitcoin Halving and Gross Margins: CleanSpark successfully navigated the challenges posed by the Bitcoin halving event, maintaining strong gross margins despite the 50% reduction in block rewards. The company only recorded a 7% decrease in revenue during this period, mining a total of 1,583 Bitcoin in the third quarter. Gary A. Vecchiarelli, CFO of CleanSpark, highlighted the impact of two key non-cash factors on the company's financial results: an unfavorable mark-to-market adjustment on Bitcoin holdings and the impairment of less-efficient miners, both contributing to the net loss.
• Partnership with Coinbase and Strengthened Balance Sheet: CleanSpark entered into a strategic partnership with Coinbase, securing a USD 50 million revolving line of credit collateralized by a portion of its Bitcoin holdings. This agreement enhances the company’s liquidity position and provides access to capital at a low cost, enabling CleanSpark to capitalize on emerging market opportunities. The company’s balance sheet remains strong, with total assets of USD 1.48 billion and total liabilities of USD 73.4 million as of June 30, 2024.
• Working Capital and Financial Position: As of the end of the third quarter, CleanSpark maintained a solid financial position with USD 531.9 million in working capital and USD 11.0 million in debt. With USD 129.2 million in cash and USD 413.0 million in Bitcoin holdings, the company is well-positioned to continue its expansion and strategic initiatives while maintaining a strong balance sheet.

Technical Observation (on the daily chart):

The Relative Strength Index (RSI) over a 14-day period stands at a value of 26.46, currently inside the oversold zone, with expectations of a consolidation or an upward momentum from the current support levels of USD 7- USD 8. Additionally, the stock's current positioning is below both the 50-period SMA and 200-period SMA, which may serve as dynamic short to medium-term resistance levels.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Speculative Buy’ rating has been given to CleanSpark, Inc. (NASDAQ: CLSK) at the closing market price of USD 8.09 as of September 06, 2024. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is September 06, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.