Bitfarms Ltd. (NASDAQ:BITF) maintained its Buy rating and $4.00 price target from H.C. Wainwright following the recent settlement with Riot Platforms (NASDAQ:RIOT), ending months of takeover tensions. The settlement agreement, announced on Monday, concludes Riot's hostile bid to acquire Bitfarms, which started in April after Bitfarms' board rebuffed Riot's unsolicited proposal.
Riot had subsequently purchased 90.1 million Bitfarms shares, representing 19.9% of the outstanding shares. Riot also sought to call a special meeting of Bitfarms' shareholders in June to propose changes to the board. This action is now retracted as part of the settlement terms.
The resolution of this conflict removes a significant uncertainty for Bitfarms, allowing the company to focus on its growth strategy and target of reaching 21 EH/s of computing power by the end of 2024.
The analyst from H.C. Wainwright views the agreement as beneficial for both Bitfarms and Riot, averting what could have been an expensive and protracted proxy fight. With the distraction of the takeover bid now lifted, Bitfarms' management team can concentrate on operational goals and growth initiatives.
Following the announcement of the settlement, Bitfarms' stock saw a 1.7% increase, while Riot's shares experienced a 1.3% rise, against a 0.30% gain in the Nasdaq overall. The analyst believes that Bitfarms shares are significantly undervalued, trading at roughly a 40% discount to peers based on estimated 2024 revenues.
In other recent news, Bitfarms Ltd. reported a decrease in its Q2 2024 revenue to $42 million, along with a net loss of $27 million. Despite this, the company continues to pursue its growth strategy, with an accelerated deployment of Bitcoin miners at a Pennsylvania site operated by Stronghold Digital Mining Hosting, LLC. This move is expected to contribute an additional 2.2 exahash per second (EH/s) to Bitfarms' capacity in October 2024.
In a significant development, Bitfarms and Riot Platforms reached a settlement agreement, ending Riot's previous hostile takeover efforts. H.C. Wainwright maintained its Buy rating and a $4.00 price target for Bitfarms following the agreement. This settlement allows Bitfarms to focus on its growth strategy and aim to achieve its 21 EH/s guidance by the end of 2024.
Meanwhile, Riot Platforms has increased its stake in Bitfarms to 18.9%, acquiring an additional one million common shares. This development follows a period of ongoing tensions between the two companies, with Riot advocating for changes in Bitfarms' Board of Directors.
InvestingPro Insights
As Bitfarms Ltd. (NASDAQ:BITF) navigates the post-settlement landscape with Riot Platforms, real-time data from InvestingPro provides a nuanced understanding of the company's financial position. Bitfarms holds more cash than debt, a reassuring sign of financial stability (InvestingPro Tip). Moreover, the company's revenue has grown by 37.27% over the last twelve months as of Q2 2024, indicating a robust upward trajectory in sales. However, it's important to note that analysts do not anticipate the company will be profitable this year, and Bitfarms has been quickly burning through cash (InvestingPro Tip).
InvestingPro Data further reveals a market capitalization of $934.14M USD, which, when juxtaposed with the company's P/E ratio of -6.34, highlights the challenges Bitfarms faces in terms of profitability. The stock has experienced volatility, reflected in a 1-month price total return of -15.98%, underscoring the uncertainties that come with investing in the company. Despite this, Bitfarms has shown a strong return over the last year with a price total return of 93.4%, suggesting potential for long-term gains.
For investors seeking a deeper dive into Bitfarms' financial health, additional InvestingPro Tips are available, providing a comprehensive analysis to guide investment decisions. With these insights, stakeholders can better assess the valuation and future prospects of Bitfarms as it aims to expand its computing power and operational goals.
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