Summary HIVE Digital presents a strong risk/reward opportunity, with a potential double bottom at $2.80 and positive earnings on the horizon. The stock is well-correlated to Bitcoin but currently undervalued, making it a compelling buy if Bitcoin prices rise. HIVE's efficiency and expected growth in hashrate and sales bolster the bullish case, despite its smaller scale compared to larger miners. With Wall Street's price targets nearing $8 and a solid balance sheet, HIVE offers excellent upside potential if Bitcoin's bull run continues. The Bitcoin miners have been a volatile group – to say the least – over the past few months as the OG alt-currency has rallied to new all-time highs. Many of the miners, however, have not partaken in the rally as one may have expected, setting up what looks to be strong risk/reward for the bulls as we begin 2025. One of the smaller miners – HIVE Digital ( HIVE ) – looks to be in such a position as it’s very cheap, and the stock appears to have made a double bottom. While we can’t be sure it has made the bottom, we can be sure the risk/reward is in our favor. I’m slapping a Strong Buy on HIVE today; let’s dig in. Is the bottom in? I suspect we’ll know the answer to that definitively in the not-too-distant future. The double bottom I’m eyeing is in the area of $2.80, which held in October, and then again in late-December. That’s my line in the sand, and below that level, I don’t want to own HIVE as it will have started a new downtrend if that were to occur. StockCharts Price support is the most important thing, so that’s item number one. However, the PPO has turned higher and the histogram is actually positive for the first time since November, which is a sign of burgeoning bullish momentum. On the flip side, the RSI has been weak and unable to crest 50 for several weeks. An early sign that the character of this stock has changed to be more bullish is the RSI holding above 50; we don’t have that yet. Now, it stands to reason that a Bitcoin miner should somewhat mimic the price action of the product that it mines, similarly to how you’d expect a gold miner to follow gold’s price. Below we have HIVE’s 20-day rolling correlation to Bitcoin in the top panel, and the bottom panel shows the price of Hive relative to Bitcoin. StockCharts We can see in the top panel that the current correlation is 0.77, so the stock is pretty well correlated to Bitcoin. It very rarely goes negative, and is generally in the 0.80 area. That tells us that HIVE is indeed decently correlated to Bitcoin. That makes logical sense, but it’s always a good idea to validate assumptions. The interesting thing is that HIVE’s valuation against Bitcoin has never been lower than it is now. HIVE traded for some absolutely indefensible valuations during the last bull run in Bitcoin, but even just looking at the past year or two, it’s cheap by this measure to be sure. So, we have a stock that is well-correlated to Bitcoin, but is also massively underperforming. That could be a huge opportunity for a cheap stock, or it could be that HIVE’s underperformance is because of some other factor. Let’s take a look at the fundamental case to see if we can figure that out. Earnings incoming One thing that supports the bull case in my view is that HIVE is actually on the cusp of positive EPS. Bitcoin mining is a complicated game from an accounting perspective, and many miners struggle to produce positive EPS. If estimates are proven correct, HIVE is at less than 12 times 2027 earnings. Obviously, we’ll see what happens between here and there but this is a really great start. Seeking Alpha Sales are expected to nearly double in fiscal 2026, and then again in 2027. If HIVE gets anywhere near that level of growth, we’ll all be wishing we’d bought more at $3 per share. Revisions are mixed as they’re split half-and-half between positive and negative, so not much to add there. So, the key here is whether or not HIVE can get to those sales growth numbers that will then most likely translate into earnings. Part of that is certainly hashrate growth, which is expected to be robust. Investor presentation HIVE sees its EH/s roughly doubling from March to ~September of this year as its new capacity comes online. Not only that, but its efficiency should rise further as that capacity comes online as well. This is definitely part of the growth story as ever-rising capacity and efficiency is the name of the game in Bitcoin mining. To be fair, HIVE is nowhere near the scale of some of the bigger miners. But it’s also much cheaper (in my view) than some of the other names, so it looks to me like there’s a discount in place. Valuations are always in the eye of the beholder so you can feel free to disagree, but that’s what I’m seeing. The other part of this is that operating costs outside of those attributable to mining are very low at HIVE. Investor presentation The company reckons it is the most efficient operator in the space as measured by G&A costs as a percentage of revenue. G&A can be a variety of things and can differ from company to company, so I’m not here to argue about the exact figures. The point is that HIVE is operating extremely efficiently, which boosts profit margins, and its ability to get to positive EPS sooner than later. As the price of Bitcoin moves, so does the company’s margins on the Bitcoin it mines. Investor presentation This example shows that annualized mining margin later this year at the forecasted 12.5 EH/s, and $85k per Bitcoin, would be about double what it is today. Of course, if Bitcoin moves up from here, those numbers improve. If it moves down, they worsen. But the point is that extra capacity to mine and higher Bitcoin prices is the bull case here. Investor presentation HIVE has 2,805 Bitcoin on its balance sheet after mining 103 coins in December. That puts the current value of its coins at ~$262 million. The current market cap is $412 million, meaning the business is being valued at $150 million today, or $1.16 per share based on the current share count . I don’t know about you, but that sounds pretty cheap to me based on the fact that earnings are supposed to turn positive over the next few quarters. The balance sheet is in good shape as well, with negative net debt and the company funding itself through coin sales and share issuances. The latter one – share issuances – are one of the potential bearish wildcards in place today. TIKR HIVE has made a habit of issuing fairly substantial numbers of shares to fund operations. While that could end up working out if returns are sufficient to cover the cost of the issuances to shareholders, it also may not. It is my opinion that HIVE has cheap shares today based upon the value of its Bitcoin and its operations. If that’s the case, I’d prefer it fund operations through Bitcoin sales or even debt. Share issuances have their place when a stock is really expensive – think GameStop issuing huge amounts of shares at insane valuations to cash in – but HIVE is not in that situation. So what’s it worth, then? That’s the big question, so let’s take a look at some ways to value the stock. We’ll start with price-to-sales. TIKR HIVE’s P/S has been in the area of 2X to 5X (roughly) over most of its life, ignoring the 2021 madness we saw. We’re at 2.4X today, but I’d also argue HIVE deserves a higher multiple as margins have continued to improve. Investors should pay a higher multiple for sales as margins improve, as each dollar of sales is more valuable from an earnings perspective as margins rise. With profits incoming, the P/S ratio should logically rise. That would make 2.4X sales very cheap if that comes to fruition, as we could easily be looking at 5X to 8X sales. StockCharts I touched on HIVE’s value relative to Bitcoin earlier and this is just the past twelve months. We can see HIVE’s value has declined 65% relative to Bitcoin, and we also know that well over half of HIVE’s value is tied to its Bitcoin holdings. That makes this chart all the more peculiar as HIVE’s valuation to Bitcoin should be tied much more closely. If HIVE’s holdings were 5% of its market cap I would get it. But we’re talking something like two-thirds of its market cap, so it should trade much more closely with Bitcoin than it is. Perhaps that is why Wall Street has lofty targets on the stock. Seeking Alpha The average price target has risen significantly in the past couple of months and stands now at nearly $8. That’s a long way up from the current $3.12, offering one of the best risk/rewards I’ve seen in a while on this measure. With price targets rising, HIVE is certainly looking strong to me. As I said above, I’m sticking a Strong Buy on HIVE. The company’s Bitcoin holdings continue to grow, and its correlation to Bitcoin – and value relative to Bitcoin – should rise as a result. I happen to think Bitcoin has a long way to go in this cycle, and that would mean good things for HIVE, both from its balance sheet’s value and its mining operations. The stock is cheap enough that the risk/reward here is excellent, and I wouldn’t be surprised to see something like $8 or $10 per share later this year if the bull run in Bitcoin continues. Risks exists here, as we discussed earlier, so keep stops in place. For me, that line in the sand is $2.80. But above that, HIVE is a strong value proposition.
