BTDR: Expanding Power Portfolio Will Unlock Competitive Advantage Amid AI Infrastructure Shift

Key Takeaways

• Proprietary technology and vertical integration aim to reduce costs, drive revenue growth, and improve operational efficiency in the ASIC and Bitcoin mining markets.
  
• Expanding self-mining capacity and commercialization of SEALMINER ASICs are expected to boost Bitcoin output and diversify revenue streams.
  
• Bitdeer's revenue and margin challenges, paired with high R&D costs and capital expenditures, suggest financial pressures and potential volatility in earnings.

Catalysts

Operates as a technology company for blockchain and computing.

• Bitdeer's development of proprietary ASIC technology is expected to create cost advantages and open opportunities in selling machines to penetrate the $4 billion to $5 billion annual ASIC market, which could drive significant revenue and margin improvements.
  
• The acquisition and planned development of a 101-megawatt gas-fired power plant in Alberta aim to provide a low-cost, vertically integrated power source for Bitcoin mining and potential revenue from selling excess power, improving operational efficiency and lowering production costs, which should enhance net margins.
  
• Bitdeer's strategic focus on vertical integration, including developing internal technologies and capabilities, aims to maximize long-term shareholder value by reducing operating costs and improving margins, thus positively impacting earnings.
  
• The planned commercialization of SEALMINER ASICs, coupled with a high demand for energy-efficient mining machines, represents a diversification of revenue streams and is likely to enhance revenue growth as Bitdeer becomes a key player in the ASIC market.
  
• The planned ramp-up to 40 exahash in self-mining capacity by Q4 2025, leveraging newly developed ASICs and expanded power capacity, is expected to significantly increase Bitcoin production, thereby driving revenue and potentially improving margins due to economies of scale.

Bitdeer Technologies Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bitdeer Technologies Group's revenue will grow by 71.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from -89.8% today to 19.1% in 3 years time.
• Analysts expect earnings to reach $343.9 million (and earnings per share of $-0.23) by about September 2028, up from $-320.3 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $-52.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.6x on those 2028 earnings, up from -8.1x today. This future PE is lower than the current PE for the US Software industry at 36.6x.
• 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 8.57%, as per the Simply Wall St company report.

Bitdeer Technologies Group Future Earnings Per Share Growth

Risks

• Bitdeer's Q4 2024 revenue decreased significantly to $69 million from $114.8 million in Q4 2023, driven by reduced cloud hashrate and hosting revenue, potentially impacting future revenue growth.
  
• The company reported a negative adjusted EBITDA of $3.8 million for Q4 2024, reflecting inefficiencies and increased R&D costs that could challenge future net margins.
  
• Bitdeer experienced a significant IFRS net loss of $531.9 million due to noncash derivative losses, signaling potential volatility in future earnings due to financial instrument valuation changes.
  
• High operating expenses, especially elevated R&D costs related to ASIC development and noncash amortization, could compress net margins if not matched by future revenue growth from ASIC sales or efficient operational execution.
  
• The reliance on significant capital expenditures, such as the funding of a $90 million gas plant in Alberta, could strain liquidity if anticipated cash flows from new mining operations or ASIC sales do not materialize as expected, impacting earnings stability.

Valuation

• The analysts have a consensus price target of $21.873 for Bitdeer Technologies Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $33.6, and the most bearish reporting a price target of just $17.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.8 billion, earnings will come to $343.9 million, and it would be trading on a PE ratio of 19.6x, assuming you use a discount rate of 8.6%.
• Given the current share price of $13.26, the analyst price target of $21.87 is 39.4% 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.