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Around April 19th, the Bitcoin network will undergo its 4th halving, reducing the miners’ block reward from 6.25 BTC to 3.125 BTC. Consequently, Bitcoin miners will face a profitability hit afterward. In this cycle of the survival of the fittest, non-profitable miners will exit the ecosystem. 

However, as non-profitable miners exit the arena, Bitcoin’s mining difficulty is lowered. This makes it easier for the remaining Bitcoin miners to increase profits post-halving. The present cycle with Bitcoin ETFs and 93.52% of BTC already in circulation translates to greater Bitcoin demand.

In December, BTC reserve on exchanges hit its lowest level of 2 million BTC from 2.7 million BTC in early 2021. The Bitcoin price went up 66% to $61k in the last three months. Bitcoin mining stocks followed suit with a 92% boost, as expressed via Valkyrie Bitcoin Miners ETF (WGMI).

As Bitcoin ETFs show ~10,000 BTC inflows vs daily 900 BTC mined, Bitcoin is poised to hit a new ATH this year. The question for stock investors is, which Bitcoin mining stocks are likely to keep going and remain profitable post-halving?

TeraWulf, Inc. (Nasdaq: WULF)

Over the last three months, WULF shares of this Maryland Bitcoin miner gained 85% value. As a relatively new Bitcoin mining company founded in 2021 focused on 100% zero-carbon energy, TeraWulf reported total hashrate power of 5.5 EH/s as of Q3 2023 earnings. This was a 267% improvement from the year-ago quarter.

Over the prior quarter, TeraWulf generated 3.3% more gross profits at $10.7 million. However, the company reduced its gross profit margin by 15.7% due to BTC price fluctuations. Most importantly, the company reduced its total liabilities by 21% to $157.8 million from the year-ago quarter, against the total value of its assets at $311.8 million.

Although suffering a $62.9 million net loss in cash flows from operations, mainly from expenses incurred by nuclear-powered Nautilus Cryptomine, the company is well-positioned to benefit from the ongoing BTC price rise. Overall, TeraWulf mined 994 BTC.

Based on five analyst inputs pulled by Nasdaq, WULF stock is a “strong buy.” The average WULF price target is $4 vs the current $2.26 per share, making it a cheap exposure to Bitcoin mining stocks.

CleanSpark, Inc. (Nasdaq: CLSK)

Over the last three months, CLSK stock is up 263%. Like TeraWulf, the company orients its efforts on low-carbon energy sources, ranging from solar and hydroelectric to wind and nuclear. At the end of January, CleanSpark reported 10 EH/s mining capacity while holding 3,573 BTC.

2023 the company reported a 60% BTC mining increase of 7,391 BTC. Most recently, on February 26th, CleanSpark announced the acquisition of three Bitcoin mining data centers in Mississippi, which would effectively elevate its hashrate power to 15 EH/s.

In Q1 FY24 earnings delivered in February, CleanSpark reported 165% year-over-year revenue growth. Against $862.7 million in total assets, CleanSpark has one of the lowest liability levels, at $52.2 million. This makes it exceedingly well-positioned to survive beyond Bitcoin’s 4th halving.

Based on six analyst inputs pulled by Nasdaq, CLSK stock is a “strong buy.” Twelve months ahead, the average CLSK price target is $14.25 vs the current $20. The high estimate is $27, while the low forecast is $8 per share.

Bitfarms Ltd. (Nasdaq: BITF)

Another Bitcoin-mining penny stock, BITF, has increased 212% over the last three months. In 2017, Bitfarms has made news by decentralizing its mining capacity and utilizing a local surplus of hydroelectric sources and natural gas. 

Bitfarms made its most ambitious upgrade in November 2023 by ordering nearly 36,000 of the latest and most cost-effective Bitmain T21 mining rigs. As of Q3 2023 earnings, the company mined 1,172 BTC, increasing BTC holdings from 154 BTC to 703 BTC.

Bitfarms plans to increase its power capacity to 290 MW in Q1 24, a 24% increase. This would eventually boost its hashrate capacity from the present 6.5 EH/s up to 17 EH/s.

The company’s gross mining margin slightly lowered from 42% to 38%, delivering a net loss of $19 million for the quarter. Against $47 million in cash and 703 BTC, Bitfarms has $45.3 million in total liabilities. Based on five analyst inputs pulled by Nasdaq, BITF stock is a “strong buy.”

The average BITF price target is $4.5 vs current $3.6 per share. The high estimate is $5.5, while the low forecast is above the current price level at $4 per share.

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