Bit Digital (BTBT) stock is under pressure, losing 27.8% of its value in the year to date. Macroeconomic uncertainties and reduced Bitcoin (BTCUSD) production weighed on its share price. However, analysts remain bullish on this penny stock’s prospects and see significant growth potential as the company has transformed its business model.
Strategic Growth and Financial Strength
Bit Digital’s transition away from being exclusively a digital asset mining company has opened lucrative opportunities in high-growth markets, including artificial intelligence (AI) and cloud computing. This shift is already reflected in its financial performance, with revenue soaring by 141% year-over-year in fiscal 2024. The company’s adjusted EBITDA also jumped to $73 million from $12.4 million in the prior year.
The acquisition of Enovum supported its transformation. This move strengthened Bit Digital’s data center operations, expanded its customer base, and brought in an experienced team. It also enhanced the company’s ability to scale its infrastructure operations efficiently.
The Rise of Cloud and AI Services
Bit Digital is focusing on expanding its AI infrastructure business and has introduced WhiteFiber, its new high-performance computing (HPC) platform. Thanks to solid demand, the cloud services division has quickly emerged as the company’s primary revenue driver. In the fourth quarter alone, cloud services brought in $13 million in revenue, making up 50% of total sales and 64% of gross profit.
The company’s gross profit margins came under pressure due to the upfront costs of acquiring new GPUs and leasing additional data center capacity. However, these expenses are expected to level out. Bit Digital continues to invest in expanding its GPU fleet and is acquiring them outright, which should improve margins over time.
The company’s cloud services are generating an annualized revenue run rate (ARR) of $62 million, with further growth on the horizon. By the end of June, Bit Digital plans to deploy 512 B200 GPUs, adding an estimated $15 million to ARR. Moreover, strong demand for reserved B200 contracts indicates that this cluster alone could contribute up to $25 million in ARR, further solidifying the company’s position in the rapidly growing AI and HPC markets.
Expanding Data Center Capacity
Bit Digital’s infrastructure expansion is progressing rapidly, with its development pipeline now totaling 510 megawatts, including 156 megawatts under exclusive letters of intent (LOI). It is strategically acquiring sites in Canada and the U.S., which will support its future growth.
The company’s most significant pipeline expansion has been in the U.S., where its newly acquired site could significantly boost its data center platform. This project has the potential to be the company’s largest to date, significantly increasing its market share and operational capacity.
Looking ahead, inference will drive long-term demand for AI compute. To capture this opportunity, Bit Digital is focusing on metropolitan locations that will help attract a wide range of customers.
Bitcoin Mining: A Balanced Approach
While Bit Digital remains active in Bitcoin mining, the company is prioritizing cost efficiency and fleet optimization. In 2023, Bitcoin mining contributed 98% of Bit Digital’s total revenue. However, that number dropped to 54% in 2024 as the company redirected capital to HPC initiatives. This move reflects a broader strategy to diversify its revenue streams while maintaining a strong foothold in the crypto-mining industry.
Instead of committing significant capital to mining expansion, Bit Digital is focused on refining its operations, reducing costs, and maximizing profitability. Mining remains an integral part of its portfolio, but the company’s primary investment focus is on scaling its HPC business.
Analyst Sentiment and Stock Outlook
As Bit Digital continues to expand its AI and cloud infrastructure, the company will likely deliver significant growth, which could drive its share price. It remains debt-free, and its solid balance sheet gives Bit Digital the flexibility to pursue expansion and capitalize on rising demand.
Wall Street analysts are highly optimistic about Bit Digital’s future, with the stock receiving five unanimous “Strong Buy” ratings. The consensus price target is $6.10, representing potential upside of 190% from its current levels.
