To The Moon

HC Wainwright & Co analyst Mike Colonnese upgraded Iris Energy Ltd (NASDAQ:IREN) from Neutral to Buy and an $8 price target. Earlier this week, IREN disclosed a transaction in which it could utilize all $67 million of remaining mining equipment deposits with Bitmain as part of an existing equipment contract to acquire 4.4 EH/s of S19j Pros (44,000 rigs) for its self-mining operations. The transaction fully resolved IREN's contract with no remaining commitments to Bitmain. With greater clarity around the future of IREN's self-mining operations following the resolution of the Bitmain equipment contract, the analyst renewed confidence in the company's ability to drive material revenue growth over the coming quarters. In his view, the news changed the narrative for shares, as IREN had gone from considering lower-margin hosting to monetize excess mining infrastructure as recently as December to now poised to deliver a 224% increase in self-mining capacity in 1H23. IREN defaulted on two equipment finance loans totaling $108 million in November 2022, which reduced the company's operating hash rate. There had also been a great deal of uncertainty around the company's ability to unlock mining equipment under contract with Bitmain. IREN stopped making payments in August 2022 due to the challenging operating environment. Yesterday, IREN reported December quarter results. In F2Q23, IREN saw total mining revenues decline 15% sequentially to $13.8 million (ahead of his $13.2 million estimate), primarily driven by lower BTC prices and a reduction in the number of BTC mined due to rising network difficulty. The analyst raised his calendar-year 2023 revenue estimate to $121.5 million, up from $54.7 million on higher hash rate assumptions for IREN and higher BTC prices. The price target reflects a slight discount to mining peers, given IREN's no-hold-on for-dear life (HODL) strategy.