Citi, J.P. Morgan upgrades Riot; IREN, CleanSpark downgraded among bitcoin miners

Riot Platforms saw a notable stock increase of 5.32% to $17.63 after upgrades from Citi Research and J.P. Morgan, highlighting the company's strong potential in the Bitcoin mining market.

Citi upgraded Riot's rating to "Buy/High Risk" and raised its price target from $13.75 to $24.00, while acknowledging a 15%-20% anticipated decline in EBITDA multiples for Bitcoin mining driven by network hashrate momentum.

J.P. Morgan also elevated its rating to "Overweight" with a new price target of $19.00, citing Riot as the best value among Bitcoin miners, and noted a 50% chance of potential HPC colocation agreements with other miners.

Other companies, like Iris Energy and CleanSpark, received downgrades or lower price targets, with J.P. Morgan cautioning that significant capital expenditures for infrastructure could pose risks to current valuations.

Recommendation Rating: Positive Outlook on Riot Platforms

Riot Platforms (NASDAQ: RIOT) experienced a significant surge in stock value following upgrades from Citi Research and J.P. Morgan, both of which recognized the potential of the company as a leading player in the Bitcoin mining sector.

In the pre-market trading on Friday, shares of Riot soared by 5.32%, reaching a price of $17.63.

Citi analyst Peter Christiansen stated in a recent research note, "The surge in high-performance computing (HPC) and artificial intelligence (AI) activities, particularly the partnership between Oracle and OpenAI involving a substantial $300 billion infrastructure investment, has prompted us to reassess our timing and the worth of RIOT's planned capacity for HPC and AI."

Citi is currently awaiting Bitcoin metrics at the end of the month to finalize its third-quarter estimates. However, it has adjusted its sum-of-the-parts (SOTP) framework to consider 400 megawatts (MW) of approved and energized capacity, now valued at $12.4 million per MW. This valuation is partially mitigated by an anticipated 15%-20% decrease in EBITDA multiple for Bitcoin mining, which reflects the increasing momentum observed in the Bitcoin network's hashrate.

Following these updates, Citi upgraded its recommendation for RIOT to "Buy/High Risk" from "Neutral," and increased its price target from $13.75 to $24.00.

In parallel, J.P. Morgan analysts Reginald Smith and Charles Pearce raised their rating on Riot to "Overweight" from "Neutral." They assigned a new price target of $19.00, up from $15.00, emphasizing that Riot stocks currently represent the best value among Bitcoin miners.

According to J.P. Morgan's analysis, there is a 50% likelihood that Cipher Mining (CIFR), Iris Energy (IREN), and Riot will enter into HPC colocation agreements at their respective near-term capacities. This assessment considers Core Scientific's outstanding 800 MW of committed capacity to CoreWeave as a benchmark for near-term demand by a single tenant. Their analysis indicated that Riot has the greatest relative upside potential, estimating an increase of about 14%.

In their note, the analysts pointed out that they believe IREN shares are already reflecting an expectation for a colocation deal exceeding 1 gigawatt (GW) at Sweetwater. They cautioned this scenario involves record-scale capital expenditures (over $10 billion) and, while feasible over time, could present more downside risks than upside potentials at current price levels.

Consequently, J.P. Morgan downgraded IREN from "Neutral" to "Underweight," despite raising its price target from $16.00 to $24.00. The pre-market trading showed IREN shares declining by 4.23%, priced at $44.33.

Additionally, CleanSpark (NASDAQ: CLSK) received a downgrade to "Neutral" from "Overweight," with a price target decreased from $15.00 to $14.00. CLSK shares fell by 3.87% to $13.15. Smith and Pearce noted, "The current pricing of CLSK shares appears to fully reflect the company's recent growth to 50 EH/s, and investors may need clearer insights regarding the company’s strategic approach to HPC for further increases in stock value."

Cipher Mining maintained a "Neutral" rating with a price target of $12.00, while Marathon Digital Holdings (MARA) was rated "Overweight" with a price target of $20.00. MARA’s shares rose by 1.31%, reaching $16.28, whereas CIFR saw a slight decrease of 0.39%, settling at $11.62.