There's been no shortage of catalysts for Bitcoin (BTCUSD) in 2024, from the January launch of spot Bitcoin exchange-traded funds (ETFs) to the April “halving” event. More recently, cryptocurrency markets have been keyed on potential policy changes, with former President Trump voicing support for Bitcoin, while the Fed's jumbo rate cut has also thrust alternative currencies into the spotlight.
Against this backdrop, Iris Energy (IREN), a Bitcoin miner, could be a prime growth stock to scoop up in this space. IREN has achieved record-breaking sales of $188.7 million in fiscal year 2024, alongside adjusted EBITDA of $54.7 million, and is poised for further growth with the expansion of AI cloud services.
Recently, the company has invested heavily in Nvidia (NVDA) GPUs to enhance its high-performance computing capabilities, as IREN looks to diversify its revenue streams beyond Bitcoin mining. Backed by positive analyst ratings and considerable upside potential, here's a closer look at IREN's growth potential in the artificial intelligence (AI) market.
About IREN Stock
Based in Sydney, Iris Energy (IREN) is a Bitcoin mining company that builds and operates electrical infrastructure and data centers dedicated to mining Bitcoin. Specializing in leveraging 100% renewable energy, IREN powers its high-performance computing infrastructure to provide scalable solutions. While its core business has traditionally been Bitcoin mining, with substantial capacity and efficiency, the company is now rapidly expanding into AI cloud services, diversifying its offerings and positioning itself for future growth.
Valued at $1.13 billion by market cap, shares of the Bitcoin company have outperformed the broader market over the past year. IREN has jumped 71.2% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 28.6%. However, in 2024, IREN stock is up only 8.9%, compared to the SPX's nearly 20% advance.
From a valuation perspective, IREN trades at 13.08 times forward earnings, which is significantly lower than the tech sector median of 23.8. This relatively discounted valuation presents an opportunity to buy this under-$10 stock while it's cheap.
IREN Reports Mixed Q4 Results
On Aug. 28, Iris Energy revealed its Q4 earnings results for the 2024 fiscal year. The company showcased strong revenue growth, exceeding expectations on the top line, even as the Bitcoin miner missed Wall Street's mark on bottom-line growth.
Net sales reached $54 million, primarily driven by the expansion of its Bitcoin mining capacity and growth in AI cloud services. The company significantly increased its Bitcoin mining hash rate, reaching 15 EH/s, and is on track to hit 30 EH/s by year-end, allowing for higher Bitcoin production at favorable prices.
However, IREN reported a loss of $0.27 per share this quarter due to rising operational costs, which nearly doubled from the previous year. Depreciation expenses surged to $50.7 million due to aggressive capital expenditures in expanding data centers and mining infrastructure, leading to a temporary cash burn in this quarter. However, this cash burn is expected to subside once the expansion is completed and capital expenditures decrease.
Looking ahead, analysts anticipate the company becoming profitable in fiscal 2025, with estimated earnings of $0.41 per share.
On the liquidity side, IREN's cash position remains solid, with $404.6 million in cash reserves and no debt, providing financial flexibility for future growth.
Moreover, IREN enjoys a gross profit margin of 88%, compared to the sector median of around 50%. This margin reflects the company's ability to manage costs effectively, primarily due to its 100% renewable energy-powered operations, which significantly reduce electricity expenses, a major cost driver in the Bitcoin mining industry.
IREN Expands AI Cloud Services
Iris Energy recently made a significant investment in Nvidia GPUs to expand its AI cloud services. The company has purchased 1,080 NVIDIA H200 GPUs, valued at $43.9 million, bringing its total GPU fleet to nearly 1,900. This investment will help IREN meet the growing demand for AI cloud services by offering high-performance computing solutions alongside its core Bitcoin mining operations.
The new GPUs are scheduled for delivery and commissioning in the fourth quarter of calendar year 2024. With this expansion, IREN aims to diversify its revenue streams, projecting AI cloud services to generate around $33 million annually. Additionally, co-founder and co-CEO Daniel Roberts stated that this investment is expected to boost the AI Cloud Services' contribution to IREN's earnings to approximately 10% by year-end, with further growth anticipated through 2025.
What Do Analysts Say About IREN Stock?
IREN's strategic growth has garnered generally positive attention from analysts. A few analysts have recently trimmed their price targets on the stock, and Needham recently handed out IREN's first-ever “hold” rating, with the firm observing that the stock seems fairly valued at current levels.
However, Wall Street analysts have rated IREN a "strong buy" overall, with 8 "strong buys" and 1 "hold." Wall Street has set a mean price target of $15.62, indicating an expected upside potential of more than 100% from current levels.
Final Words
IREN's investment in Nvidia GPUs for AI cloud services uniquely positions it for long-term growth in cryptocurrency and artificial intelligence, two of the most exciting megatrends. With strong analyst backing and forecasts calling for IREN to double in value, this stock is one to consider for investors who don't mind the short-term volatility, and are seeking exposure to upside potential in both Bitcoin and AI innovation.
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
