Renewable Mining Conversion Will Unlock HPC And AI Potential

Key Takeaways

• Expansion into renewable-powered data centers and high-performance computing aligns with green energy trends, unlocking new high-margin revenue streams and regulatory support.
  
• Strategic positioning as a U.S.-based, institutionally accessible company with consistent cash flow and share buybacks supports valuation growth and mitigates shareholder risk.
  
• Regulatory uncertainty, high capital needs, geographic concentration, unproven data center transition, and ongoing Bitcoin exposure create significant execution and financial risks for Bitfarms.

Catalysts

Operates integrated bitcoin data centers in Canada, the United States, Paraguay, and Argentina.

• Bitfarms is uniquely positioned to capitalize on growing institutional demand for Bitcoin and the increased digitization of financial systems, evidenced by its large, efficient North American mining footprint and growing Bitcoin holdings. This could drive higher future revenue and improved profit margins as Bitcoin adoption continues and prices rise.
  
• Strategic conversion of renewable-powered mining sites (particularly in Quebec and Washington) into high-performance computing (HPC) and AI data centers aligns with the global trend toward green energy in tech infrastructure, potentially granting access to ESG-driven capital and regulatory support, while unlocking new high-margin revenue streams.
  
• Development of large-scale HPC/AI campuses in emerging data center hubs like Pennsylvania-supported by robust enterprise demand, political tailwinds, and partnerships with top-tier developers like T5-positions Bitfarms for sustained earnings growth and margin expansion through long-term, contracted revenue streams.
  
• Bitfarms' proactive transformation into a U.S.-based entity with U.S. GAAP adoption and targeted index inclusion significantly broadens access to institutional capital, which, combined with ongoing positive free cash flow and a clean balance sheet, improves capital efficiency and the potential for valuation multiple expansion.
  
• The ongoing share buyback program, funded by steady mining cash flows, demonstrates management's confidence in undervaluation and supports near-term EPS growth while the market awaits the realization of substantial HPC/AI revenue, further reducing downside risk to shareholders.

Bitfarms Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bitfarms's revenue will grow by 27.1% annually over the next 3 years.
• Analysts are not forecasting that Bitfarms will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Bitfarms's profit margin will increase from -35.1% to the average CA Software industry of 11.8% in 3 years.
• If Bitfarms's profit margin were to converge on the industry average, you could expect earnings to reach $59.7 million (and earnings per share of $0.09) by about August 2028, up from $-86.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 46.3x on those 2028 earnings, up from -8.1x today. This future PE is lower than the current PE for the CA Software industry at 50.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.76%, as per the Simply Wall St company report.

Bitfarms Future Earnings Per Share Growth

Risks

• The company's successful pivot from Bitcoin mining to HPC and AI data centers in Quebec is contingent on regulatory approval to convert crypto mining megawatts to data center megawatts-without a clearly defined regulatory path or timeline, any delays or refusals could materially impact Bitfarms' ability to realize anticipated revenue growth and diversify its earnings base.
  
• Bitfarms' growth strategy requires outsized capital expenditures (e.g., ~$400 million for Panther Creek campus buildout) and significant reliance on access to debt financing and the timely drawdown of facilities like Macquarie's; delays, increased financing costs, or inability to meet drawdown conditions may constrain execution and pressure free cash flow and net margins.
  
• The company's shift toward North American operations does not fully eliminate geographic concentration risk, especially in Quebec and Pennsylvania, where future local regulatory, energy pricing, or policy changes could increase operating costs, disrupt operations, or induce sudden capacity reductions-leading to revenue volatility and reduced profitability.
  
• The transition from high-yield Bitcoin mining to long-term contracted HPC and AI data center revenue remains unproven for Bitfarms; prolonged or unsuccessful customer negotiations, slower-than-expected ramp-up of data center utilization, or high execution risk in complex buildouts may hinder expected revenue and EBITDA margin improvements.
  
• With ongoing Bitcoin mining operations funding share buybacks, CapEx, and G&A, Bitfarms remains highly exposed to volatile Bitcoin prices; future price downturns or higher network hash rates could significantly reduce mining revenue and free cash flow, weakening the financial underpinning of its broader transformation strategy.

Valuation

• The analysts have a consensus price target of CA$4.507 for Bitfarms based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $504.8 million, earnings will come to $59.7 million, and it would be trading on a PE ratio of 46.3x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of CA$1.75, the analyst price target of CA$4.51 is 61.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.