Hut 8 Mining Corp. (NASDAQ:HUT) (EAST:HUT) is experiencing a visible decline in revenue and profits, due to the fall in Bitcoin (BTC-USD) prices. HUT stock has lost 79.4% so far this year.
Last week, Hut 8 Mining announced a net loss of C$23.79 million in the third quarter of fiscal 2022, in stark contrast to a net profit of C$23.37 million a year ago. year.
Notably, total revenue fell 37% year-over-year to C$31.67 million in the quarter. Hut 8 mined 982 bitcoins in the quarter, up 8.5% from Q3FY21, thanks to a 10% increase in hash rate capacity to 3.07 EH/S. However, falling BTC prices reduced digital asset mining revenue to C$27.3 million in the quarter under review, from C$47.9 million in Q3FY21.
Additionally, revenue from the company’s new high-performance computing (HPC) operations was C$4.4 million, most of which is monthly recurring revenue based on subscriptions. Remarkably, Hut 8 Mining installed a total of 2,205 new MicroBT M30S, M30S+, M30S++ and M31S+ miners across its three mining sites during the quarter, helping it increase hash rate capacity. The company even managed to reduce the average cost of bitcoin mining by 29% compared to T2FY22 thanks to “improved energy prices”.
Here’s what analysts have to say about Hut 8 Mining
Following the third quarter print, Craig Hallum analyst George Sutton downgraded HUT stock to a Hold rating from Buy. Simultaneously, Sutton even reduced the price target to $2 (25% upside potential) from $5.
Sutton’s main concern is that Hut 8 Mining sent a notice of default to Validus Power Corp., due to the latter’s failure to meet specified milestones under the Power Purchase Agreement (PPA). Additionally, a failure to fix the problem could force Hut 8 Mining to pay higher energy prices, further impacting the bottom line. The analyst prefers to wait on the sidelines until more clarity is sought on the company’s cash-generating capabilities.
In contrast, HC Wainwright analyst Kevin Dede reiterated a buy rating on HUT with a price target of $5, implying a massive upside potential of 212.5% from current levels.
Dede is also skeptical of the outcome of Validus’ default notice, but does not believe it will have a major impact on Hut 8 Mining’s future potential. Additionally, the analyst is fully bullish on Bitcoin’s long-term reversal and believes that Hut 8 Mining is one of the biggest beneficiaries of the uptrend.
Is Hut 8 a good stock to buy?
As seen above, analysts have differing opinions on the trajectory of Hut 8 Mining shares. On TipRanks, HUT stock has a moderate buy consensus rating based on two buys and a hold rating. Hut 8 Mining’s average price prediction of $3.32 implies a potential upside of 107.3% from current levels.
Shares of Hut 8 Mining are suffering from the current crypto market slump. Nevertheless, the company is striving to increase its revenue while developing other regular sources of revenue from the HPC segment. The short-term outlook for the crypto market may be bleak, but in the long term, companies with strong fundamentals may be able to reap the benefits of the uptrend.