Analysts predict Bitfarms stock doubling after Riot settlement

H.C. Wainwright analysts believe that Bitfarms’ stock is poised for growth following the recent settlement with Riot Platforms, which effectively ends a six-month hostile takeover attempt.

On September 23, Bitfarms and Riot Platforms reached an agreement that concluded Riot’s bid to acquire the Canadian Bitcoin mining firm. Analysts from H.C. Wainwright set a price target of $4 per share for Bitfarms, maintaining their “Buy” rating and deeming the stock undervalued. Currently, Bitfarms (NASDAQ: BITF) is trading at $2.06 per share, reflecting a roughly 40% discount compared to other Bitcoin mining firms based on 2024 revenue estimates.

Details of the Settlement

The settlement brings closure to Riot’s pursuit, which began in April with a $950 million acquisition offer that Bitfarms’ board deemed undervalued. After this rejection, Riot acquired 19.9% of Bitfarms’ outstanding shares and attempted to change the board structure through a special shareholder meeting, a plan now withdrawn as part of the agreement.

As part of the settlement, Bitfarms will expand its board to six members and nominate an independent director, with Riot agreeing to support all proposed measures. Additionally, Riot will have the right to acquire more Bitfarms shares as long as it maintains at least 15% of the outstanding shares.

Analyst Insights

The analysts view this settlement as a significant victory for Bitfarms, removing a major overhang on the company’s stock. They believe Bitfarms can now concentrate on its growth strategy for 2024, with a target of achieving 21 exahashes per second by the end of next year. This focus is seen as crucial for restoring investor confidence and executing expansion plans without distractions.

The settlement is also considered advantageous for Riot, as it avoids the potential for a costly proxy battle. The analysts’ $4 price target is based on a 6.5x enterprise value-to-revenue multiple for 2024, consistent with valuations of other Bitcoin mining peers. However, they do caution that risks such as Bitcoin price fluctuations, construction delays, and possible shareholder dilution could impact the outlook.

Following the settlement announcement, Bitfarms shares increased by 1.7%, while Riot’s shares rose by 1.3%, indicating a positive market reaction to the resolution.