Canadian digital asset mining company Hut 8 Mining Corp. (NASDAQ:HUT) (TSE:HUT) is witnessing a visible decline in revenues and earnings, owing to a slump in Bitcoin (BTC-USD) prices. HUT stock has lost 79.4% so far this year.
Last week, Hut 8 Mining reported a third-quarter Fiscal 2022 net loss of C$23.79 million, in stark contrast to a net profit of C$23.37 million earned in the year-ago period.
Notably, total revenue fell 37% year-over-year to C$31.67 million in the quarter. Hut 8 mined 982 bitcoins in the quarter, 8.5% higher compared to Q3FY21, thanks to a 10% increase in the hash rate capacity to 3.07 EH/S. However, the slump in BTC prices reduced the digital asset mining revenue to C$27.3 million in the reported quarter, compared to the C$47.9 million reported in Q3FY21.
Further, revenue from the company’s new high-performance computing (HPC) operations came in at C$4.4 million, most of which is monthly subscription-based recurring revenue. Remarkably, Hut 8 Mining installed an aggregate of 2,205 new MicroBT M30S, M30S+, M30S++, and M31S+ miners at its three mining sites during the quarter, helping it to boost the hash rate capacity. The company even managed to reduce the average cost of mining bitcoin by an impressive 29% compared to Q2FY22 thanks to “improved energy prices”.
Here’s What Analysts Have to Say About Hut 8 Mining
Following the Q3 print, Craig Hallum analyst George Sutton downgraded HUT stock to a Hold rating from Buy. Simultaneously, Sutton even slashed the price target to $2 (25% upside potential) from $5.
Sutton’s primary concern is that Hut 8 Mining has sent a default notice to Validus Power Corp., due to the latter’s failure to meet specified milestones under the power purchase agreement (PPA). Also, a failure to resolve the issue might compel Hut 8 Mining to pay higher energy prices, thus further impacting the bottom line. The analyst prefers to wait on the sidelines until more clarity is sought on the company’s cash flow-generating capabilities.
In contrast, H.C. Wainwright analyst Kevin Dede reiterated a Buy rating on HUT with a price target of $5, which implies a massive 212.5% upside potential to current levels.
Dede is also skeptical of the outcome of the Validus default notice but does not believe it will have a major impact on Hut 8 Mining’s future potential. Moreover, the analyst is fully optimistic about Bitcoin’s reversal in the long term and believes Hut 8 Mining to be one of the biggest beneficiaries of the uptrend.
Is Hut 8 a Good Stock to Buy?
As seen above, analysts have conflicting views on Hut 8 Mining’s stock trajectory. On TipRanks, HUT stock has a Moderate Buy consensus rating based on two Buys and one Hold rating. The average Hut 8 Mining price forecast of $3.32 implies 107.3% upside potential to current levels.
Hut 8 Mining stock is hurting from the current downfall in the crypto market. Nonetheless, the company is making efforts to boost revenue while also developing other regular sources of revenue from the HPC segment. The short-term outlook of the crypto market may be bleak, but in the long run, companies with solid fundamentals may be able to reap the benefits of the uptrend.