Macquarie maintained its Outperform rating on Iris Energy Ltd. (NASDAQ: NASDAQ:) and increased the stock’s price target to $13.50, up from the previous $12.00. The adjustment reflects the firm’s recognition of Iris Energy’s recent operational advancements and its potential in high-performance computing (HPC).
Iris Energy’s fourth-quarter results fell slightly short of market expectations due to increased network difficulty. Despite this, the company has successfully expanded its mining capacity, adding approximately 4.5 EH/s since its last update.
Macquarie’s continued confidence in the company is bolstered by the anticipated deployment of additional miners and the potential growth of its AI-driven HPC business.
The firm’s dual-faceted valuation model now equally weights the contributions from Iris Energy’s electric vehicle (EV) to hash rate (EH/s) metrics and HPC revenues, as well as the EV to EBITDA ratio.
Macquarie highlights Iris Energy’s infrastructure expertise and the versatile nature of its assets, which have led to efficient operations and consistent growth. The firm also points to the optionality provided by these assets, which supports a positive outlook for the company’s future.
The price target increase of approximately 13% to $13.50 is significant as it drives the valuation model, with the new target now based on a 50/50 split between EV/EHs with HPC revenues and EV/EBITDA.
Iris Energy Ltd., a prominent player in mining and AI cloud services, reported significant expansion in its fiscal year 2024 results. Cantor Fitzgerald adjusted its price target for Iris Energy, reducing it to $20.00 from $23.00, due to increased operational expenditures related to rapid expansion at the company’s Childress facility.
Despite this, Iris Energy’s revenue and electricity costs were in line with analyst estimates, and the company’s management confirmed they are on track to achieve their hash rate goals.
The company is also making progress with its plans to introduce an AI/HPC pilot in Childress by year’s end. Iris Energy has secured an option to purchase 10 EH/S of Bitmain’s latest generation mining rigs, expected to be installed by the end of the year, and extended its option to purchase 20 EH/S of rigs into 2025.
In the earnings call, Iris Energy highlighted a solid cash position and total equity of $1 billion, providing substantial flexibility for future expansion. The company also revealed manufacturing defects with Bitmain’s T21 miners, necessitating the replacement of around 1.5 exahash of capacity.
InvestingPro Insights
In light of Macquarie’s optimistic outlook on Iris Energy Ltd. (NASDAQ: IREN), recent data from InvestingPro provides additional context to the company’s financial health and market performance. Notably, Iris Energy holds more cash than debt on its balance sheet, a sign of financial stability that could support the company’s growth initiatives in high-performance computing (HPC) and mining capacity expansion. Analysts anticipate sales growth in the current year, aligning with Macquarie’s positive assessment of the company’s potential.
Furthermore, with a remarkable gross profit margin of 88.24% over the last twelve months as of Q4 2024, Iris Energy demonstrates an impressive ability to control costs relative to its revenue. However, it’s important to consider that the company is not profitable over the same period, and the valuation implies a poor free cash flow yield. Investors may also wish to note that, according to InvestingPro, the stock generally trades with high price volatility, which could impact investment risk.
For those looking for additional insights, InvestingPro offers more tips on Iris Energy, including an analysis of the company’s liquidity and profitability projections for the current year. The full list of tips, which can be found at https://www.investing.com/pro/IREN, may provide valuable guidance for investors considering the company’s stock.
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