Wall Street investment bank BTIG lowered its average 12-month price targets for bitcoin miners by 65%, citing the decline in bitcoin prices and funding concerns.
"While we expect BTC mining stocks to trade with the BTC price (just as most commodity stocks trade with the commodity), we believe the other driver of miner underperformance relative to BTC is concerns about funding growth (we think a lower BTC price means less capital for growth)," BTIG analyst Greg Lewis wrote in a research report Friday.
Bitcoin miners have been hit hard this year, losing more than 50% on average as the bitcoin price plunged after last year's bull market. The pain has been compounded for miners as the bitcoin network hashrate has risen to near all-time highs this year along with the mining difficulty, squeezing their profit margins.
These market conditions have led to investor concerns that miners will not be able to raise the funds needed to grow, as building a large-scale mining operation is very capital intensive. However, BTIG's Lewis believes that larger miners are better able to raise funds even in a bear market. "In a flat BTC market, the ability to raise capital has become much more important (think equipment, infrastructure and BTC financing), and we expect large incumbent miners to continue to have access to capital at the expense of smaller, newer miners," he wrote.
Lewis maintained his buy rating on all four mining stocks he evaluated - Riot Blockchain, CleanSpark, Core Scientific and Marathon Digital - and remains optimistic about the longer-term outlook for the industry. "Not surprisingly, our BTC mining price targets are very sensitive to our BTC price estimate; therefore, a near-term BTC price of ~$40,000 implies a 30%-40% upside potential for our price targets, while a BTC price of $50,000 implies a 90%-100% upside potential for our price targets," he wrote.