The stock market had been running behind the massive rally in shares of MicroStrategy Inc. (NASDAQ: MSTR), especially as it had become common knowledge that the company’s Bitcoin holdings would bring its valuation to new highs when and if the cryptocurrency markets rallied higher. However, that euphoria was soon met with a new reality.
Investors began scrutinizing how MicroStrategy acquired Bitcoin, noting it wasn’t the cleanest approach, with shareholder dilution and increased leverage funding the purchases. While this strategy worked for a time, market efficiency eventually took hold, wiping out over 20% of the company’s market capitalization in just a week.
Many investors feel they missed out on MicroStrategy’s rally and are searching for opportunities to capitalize on the next potential market run. Enter CleanSpark Inc. (NASDAQ: CLSK), a smaller company with its own take on MicroStrategy’s business model—one designed not just to transfer wealth but to create it, offering a unique growth potential.
How CleanSpark’s Business Model Stands Apart From MicroStrategy’s Approach
MicroStrategy is a software business operating in the technology sector. Because it makes no money, Michael Saylor, its CEO, uses the company as a vehicle to issue stock and buy Bitcoin with that money.
While working, that model can make a lot of money through leverage, as recent runs have shown, but it also poses a significant risk as irresponsible leverage needs to be used. On the other hand, CleanSpark management makes it very clear how to set investor expectations.
100% of CleanSpark’s revenue comes from mining Bitcoin, and keeping the past 12 months in mind; revenue has more than doubled to show scalability and upside potential for the company’s valuations. Do they also dilute shareholders? Yes, but not to buy Bitcoin, only to fund ongoing operations and mining costs, which is different than only buying Bitcoin.
Understanding that this business model is no different from an oil company in the energy sector gaining a funding round to explore new oil sources, Coinbase Global Inc. (NASDAQ: COIN) felt confident enough in the business model to extend a new credit line to help fund CleanSpark’s mining operations.
Up to $50 million in credit is now available for CleanSpark’s management to keep funding their Bitcoin mining setups. Where investor upside comes from, however, is twofold. First, the market has to wait on upcoming earnings to see precisely how much value from Bitcoin has made it to the balance sheet, where the stock’s value could surge.
Then, as cryptocurrency goes through cycles, just like commodities, CleanSpark may choose to unload some of the previously mined Bitcoin at more expensive prices, locking in profits for investors. As margins increase, CleanSpark’s revenue and potential book value will also increase from its balance sheet.
These two tailwinds set CleanSpark apart from MicroStrategy’s controversies and explain why more institutional investors and Wall Street analysts are showing confidence in CleanSpark’s future potential.
Wall Street Weighs In: What’s Next for CleanSpark Stock?
Starting with how analysts on Wall Street feel about CleanSpark stock, investors will be surprised to see significant upside expectations despite the bearish price action in some of its peers.
The consensus price target is set at $21.4 a share for now, meaning the stock could see up to 59.6% upside from where it trades today, not the price action that can be achieved by buying Bitcoin alone. To take things up a notch, those at HC Wainwright, since September 2024, have kept their Buy rating on CleanSpark stock.
They’ve also kept a $27 a share price target on the stock, implying a much larger upside move of up to 100%. Geode Capital Management bought into these views, boosting its holdings in CleanSpark stock by as much as 9.8% as of November 2024.
This new allocation brought their net position to a high of $57.6 million today, or 2.4% ownership in the company. Investors can also look at another sentiment gauge for CleanSpark: the way bearish traders are treating the name in the middle of a MicroStrategy crash and a Bitcoin pullback from all-time highs.
Over the past month alone, short interest for CleanSpark declined by nearly 10%, showing signs of bearish capitulation. All told, investors need to get confirmation from the coming earnings report, where the Bitcoin holdings in the company’s balance sheet will ultimately call the shots and prove or disprove the upside analysts call for today.
The article "CleanSpark Challenges MicroStrategy’s Bitcoin Playbook" first appeared on MarketBeat.
