IREN - Bitfarms: Slow And Steady Lose The Race

2024-01-26 10:01:20 ET

Summary

• BITF's production decline is a fundamental problem, primarily caused by losing its share in the Bitcoin Network, despite small expansion efforts.
• Data shows that when BITF's share in the network increased/declined in the current quarter, BITF's production in the following quarter also increased/declined.
• When compared to other miners like RIOT and CLSK, BITF could lose even more network share over the coming quarters.
• The upcoming halving cycle could see aggressive consolidation of the mining sector while BITF seems to be on the losing side.
• Although BITF is not for us, our ideal entry price for BITF will be at least 20% below its $270mil adjusted NAV.

Introduction

It is always nostalgic whenever we look at Bitfarms (BITF). How times have changed, from being our number 1 pick to being relegated from our portfolio entirely. In one of our theses published in Oct 2022 , we suggested that BITF was investable below the $137mil market cap. Just a month later in November, investors were presented with that exact entry opportunity that has asymmetric upside potential. Another 2 quarters later, our 200% return base-case target was realized even though Bitcoin has not recovered up to the price level expected....

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