Investing News / Market Commentary

CleanSpark: Riding the Bitcoin Wave or Navigating Murky Waters?

  • Declan O’Flaherty

    Declan holds a Bachelor of Commerce from the University of Alberta and has over 4 years of experience investing in financial markets. As a fundamental investor, Declan embraces the investment principles of Warren Buffett and his disciples. This puts a focus on finding businesses with healthy financials, competent and accountable leader, enduring competitive advantages, and those that are selling at discount to what they are worth.

In the tumultuous sea of cryptocurrency investments, CleanSpark (NASDAQ: CLSK) has recently made waves, climbing an impressive 16.7% following the completion of its acquisition of three bitcoin mining data centers in Mississippi. As the company boosts its operating hashrate to over 15 exahashes per second (EH/s), growth investors are eager to discern whether CleanSpark’s foray into the world of Bitcoin mining is a strategic move or a perilous venture.

Bitcoin’s Resurgence and CleanSpark’s Ascent

Bitcoin enthusiasts and investors alike have found renewed optimism as Bitcoin surged to $57,000, a milestone not seen since December 2021. CleanSpark’s CEO, Zach Bradford, expressed enthusiasm about the company’s expansion into Mississippi, emphasizing the importance of this move as a milestone for CleanSpark.

“Expanding into a new state is an important milestone for our company, and we are looking forward to partnering with the communities we are joining. By maximizing the grid services capabilities of bitcoin miners, we aim to create jobs and foster economic growth that benefits both our new neighbors and our shareholders,” Bradford stated. “Our investment in Mississippi is one more step in the direction of the shared prosperity that Bitcoin promises.”

Bitcoin’s Influence on CleanSpark’s Fortunes

The intersection of CleanSpark’s fortunes with the volatile world of Bitcoin introduces a unique set of challenges and opportunities. While the recent surge in Bitcoin prices undoubtedly contributes to CleanSpark’s positive momentum, it prompts a critical examination of the company’s long-term viability and its dependence on the adoption and price fluctuations of an asset that remains relatively unproven.

Dilution Concerns and Financial Health

One of the primary considerations for growth investors is the financial health of a company. CleanSpark, despite its recent successes, faces a daunting team net loss of $82.23 million. This raises concerns about the potential need for shareholder dilution in the future, especially if the company cannot reverse this trend and generate positive cash flows.

Moreover, the Bitcoin mining business is notorious for its significant costs. CleanSpark’s capital expenditures totaled $325 million in the trailing twelve months (TTM) to maintain properties and equipment. This substantial expenditure occurred against a backdrop of $216 million in revenue during the same period, raising questions about the company’s ability to achieve profitability in the Bitcoin mining arena.

Navigating the Bitcoin Mining Conundrum

The Bitcoin mining industry is a challenging terrain, marked by high capital expenditures, energy consumption, and the inherent deflationary nature of Bitcoin. CleanSpark’s pursuit of scalability to offset losses through Bitcoin mining seems akin to a cat-and-mouse game, with the elusive goal of staying ahead in a deflationary environment.

While the recent surge in Bitcoin’s price and demand for Bitcoin ETFs appears promising, CleanSpark’s strategic positioning and its ability to navigate the evolving landscape remain uncertain. The company’s market capitalization of $4.18 billion, a Price-to-Sales (P/S) ratio of 12.36, and a Price-to-Book Value (P/BV) of 4.97 prompt a reassessment of the current stock price’s justification.

Conclusion: A Cautionary Tale or a Bitcoin Success Story?

CleanSpark’s recent ascent is undeniably tied to the resurgence of Bitcoin. However, growth investors must tread cautiously, considering the inherent risks associated with the company’s financial health, Bitcoin’s volatile nature, and the challenges of the mining industry.

While Bitcoin continues to capture the imagination of investors, CleanSpark’s fortunes remain entwined with the cryptocurrency’s unpredictable journey. For growth investors seeking exposure to the burgeoning world of Bitcoin, a careful evaluation of CleanSpark’s fundamentals, strategic direction, and potential for long-term sustainability is imperative.

As the Bitcoin wave surges, CleanSpark stands at the forefront, offering growth investors a compelling yet intricate opportunity. Whether CleanSpark emerges as a Bitcoin success story or navigates through murky waters remains to be seen, making it a stock to watch with both anticipation and a discerning eye.

  • Declan O’Flaherty

    Declan holds a Bachelor of Commerce from the University of Alberta and has over 4 years of experience investing in financial markets. As a fundamental investor, Declan embraces the investment principles of Warren Buffett and his disciples. This puts a focus on finding businesses with healthy financials, competent and accountable leader, enduring competitive advantages, and those that are selling at discount to what they are worth.

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