In the midst of Bitcoin’s rally, many investors are searching for Bitcoin mining stocks that could also be set to rally. For example, Microstrategy (Nasdaq: $MSTR) has surged nearly 600% over the past year – mainly because of how much BTC the company owns. With that in mind, I’ve been on the hunt for other Bitcoin-centric companies, a search that brought me to HIVE Digital Technologies (Nasdaq: HIVE). Despite owning lots of BTC, HIVE stock is down 25% so far this year. But, is that about to change? Let’s examine.

Who is HIVE Technologies?

HIVE Technologies is an energy company that provides computing power for both Bitcoin mining and artificial intelligence. The company mainly focuses primarily on green energy solutions (hydroelectric power) in politically stable countries like Canada, Sweden, and Iceland.

To get a better understanding of whether or not you should buy HIVE stock, I dove into the company’s financial statements.

HIVE’s Last 3 quarters

Here is how HIVE has performed over the last three quarters: 

  • December 2023
      • Revenue: $31.25 million (+118% annually)
      • Net Income: $-6.95 million (+92% annually)
  • September 2023
      • Revenue: $22.77 million (-23% annually)
      • Net Income: $-24.55 (+27% annually)
  • June 2023
    • Revenue: $23.57 million (-46% annually)
    • Net Income: $-16.25 million (+88% annually)

Right away, we can see that revenue is growing fairly consistently on a monthly basis, jumping from $23.57m to $31.25m over the course of the year. On an annual basis, HIVE’s revenue dropped from $211.18m in 2022 to just $106.32m in 2023. Not good. But, revenue isn’t the main focus for a company like HIVE. HIVE is a Bitcoin miner that owns a significant amount of BTC. So, as BTC’s price increases, so will HIVE’s value. To find out how much BTC HIVE owns, I dug through its most recent investor presentation. 

HIVE reported roughly 2,131 BTC on its balance sheet as of Feb 2024. With BTC’s price 

hovering around $70,000, this means that HIVE’s holdings are worth roughly $149,170,000. 

Here are a few other takeaways from HIVE’s presentation:

  • HIVE mined 801 Bitcoin in Q2 2024
  • HIVE mines around 9 Bitcoin per day
  • Low shareholder dilution: HIVE ranks the lowest among other bitcoin miners like Riot (Nasdaq: RIOT) or Argo (Nasdaq: ARBK) in terms of how much it dilutes the value of shares over time. The same goes for administrative expenses.
  • HIVE maintained a positive operating margin during BTC’s last bear market.

The Value of HIVE’s BTC 

Some quick math reveals that HIVE mines roughly $630,000 worth of Bitcoin every day (9 BTC per day at $70,000 per coin). This is roughly 270 coins per month, for a value of $18,900,000 per month or $56,700,000 per quarter. 

But, HIVE doesn’t earn a 100% profit on the BTC that it mines. HIVE pays roughly $22,607 per BTC that it produces. So, if HIVE mines roughly 800 BTC per quarter then it will have to pay a total of $18,085,600. In total, HIVE can expect to earn $38.61 million each quarter in BTC value ($56,700,000 worth of BTC – $18,085,600 in expenses).

HIVE’s market capitalization is currently close to $500m, which seems pretty low considering its revenue and the value of its BTC holdings. If the price of BTC stays consistent at $70,000 then HIVE will mine another $115.83m worth of BTC this year (Since it’s already April, I’m only counting three more quarters).

This $115.83m, combined with its current holdings of $149.17m, means that HIVE will have close to $265m in BTC holdings alone by the end of the year – roughly half of its existing market cap.

Of course, this assumes that BTC’s price stays the same over the coming year – which is a bold assumption. BTC’s price could easily slide back down to $30,000, which is where it sat for most of 2023. But, BTC’s price could easily double in the coming year. This would cause HIVE’s holdings to skyrocket.

Why is HIVE Stock Down?

One thing that I found interesting about HIVE stock is that its price has fallen significantly during a Bitcoin rally. This seems contradictory. Usually, the stocks of Bitcoin-centric companies will rise (or fall) in tandem with Bitcoin’s price. So far through 2024, Bitcoin is up nearly 60%. Bitcoin-centric companies like MicroStrategy and Coinbase (COIN) are up 175% and 77%, respectively. But, HIVE stock is down over 25%. What’s going on there? 

I did a lot of digging trying to answer this question. But, I couldn’t really come up with anything tangible. Even Yahoo Finance put together an article on why HIVE stock is tumbling. But, it didn’t say anything concrete.

My best guess would be that the market just tends to undervalue the value of BTC when companies hold it on their balance sheet. This goes for most companies that buy BTC. But, it seems to be especially true for smaller cap companies, like HIVE. 

The market likely views HIVE as a mining company whose revenue is growing modestly and has valued it appropriately. But, the market is failing to price in the value of HIVE’s BTC holdings – which should be worth roughly half of the company’s market cap by year-end. One thing is for sure: the market never assumes that BTC’s price will rise over the long run…which it has a strong history of doing.

Should You Buy HIVE Stock?

It might be worth buying HIVE stock since the value of its BTC holdings appears to be undervalued by the market. Plus, buying more Bitcoin is definitely part of HIVE’s strategy moving forward. HIVE’s Executive Chairman, Frank Holmes recently had to say:

“This continuing increase aligns with the Company’s strategy to strive to HODL, anticipating heightened demand for Bitcoin due to the adoption of Bitcoin as an alternative asset class as witnessed with stunning fund flows into the recent launching of Bitcoin ETFs. We believe as we approach the Halving event in April, the short-term volatility will remain high, and investors must be aware that HIVE like our peers are usually correlated with Bitcoin but with a greater amplitude in price volatility.”

In other words, the company is bullish on BTC, so it plans to buy/mine more BTC. 

That said, if you’re bullish on Bitcoin then I’d honestly just recommend buying BTC instead of HIVE stock. There might be an investment thesis where the value of HIVE stock’s BTC holdings is undervalued. But, the easier way to play this is to just buy BTC, instead of waiting for HIVE stock to follow BTC’s movements.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor.