Summary BitFuFu is a Bitcoin miner with strong roots in cloud mining and a CEO who headed the cloud mining division at BITMAIN for several years. Cloud mining is an advantageous business model for BitFuFu because it provides ongoing working capital for the company. Q2 unaudited financial results show a 69.7% YoY growth in total sales and 66.8% YoY growth in cloud mining sales. BitFuFu's revenue has grown at an impressive ~66% CAGR, and the Bitcoin miner is on track to maintain or surpass that growth rate for fiscal year 2024. I initiated coverage on BitFuFu (FUFU) in June. That article, titled: BitFuFu: The Lesser-Known Bitcoin Miner With Growth Potentials , was the first coverage of the stock here on Seeking Alpha. I went into detail about the company's business model and operations, and the Q1 financial results in that coverage. Seeking Alpha Following my initial coverage on June 6 at a stock price of $3.59, FUFU has seen a volatile price movement, mainly due to Bitcoin’s volatility in recent times. Shortly after that publication, FUFU surged by 86%, reaching $6.71 two weeks later on June 25. Following that initial price surge, FUFU witnessed a series of volatility, recording a high of around $5.80 in July and a low of $3.90 the same month. FUFU currently trades at $4.60. We’ll find out in this article if FUFU is currently undervalued relative to peers and if the current price would be a good buy for the stock. For readers not familiar with the company, BitFuFu is a Bitcoin ( BTC-USD ) mining company headquartered in Singapore. The company has close ties with Bitcoin mining hardware manufacturing giant BITMAIN, an existing partnership with one of the biggest Bitcoin mining pools in the world ANTPOOL, and has a founder and CEO who is very experienced in the crypto mining business. The founder and CEO Leo Lu headed the cloud mining division at BITMAIN for several years, before going on to found BitFuFu in December 2020. Several other key members of BitFuFu’s team were former members at BITMAIN and Bitdeer ( BTDR ). Leo Lu’s experience in cloud mining from his time at BITMAIN reflects on BitFuFu operations today. Cloud mining has been an innovative business line for BitFuFu and is becoming the main growth driver for the company, now accounting for about 60% of the company's total revenue as of Q2 2024. FUFU started trading on Nasdaq in March this year, following a successful business combination with Arisz Acquisition in a $1.5 billion deal. A Look At BitFuFu Q2 Financial and Operational Highlights Q2 results highlights (BitFuFu) BitFuFu released their unaudited Q2 results on August 20. The financial result showed increase in sales, surge in cloud mining users, and impressive sales record from the cloud mining segment. For self-mined BTC production, the total BTC mined from the self-mining operations decreased 23.1% YoY, from 1,014 BTC in Q2 2023 to 780 BTC in Q2 2024. This decline in BTC produced during the quarter doesn't come as a surprise as virtually every Bitcoin miner has recorded a decline in BTC production since the Bitcoin halving event in April. Revenue and EBITDA trend (BitFuFu) Zooming out and examining BitFuFu’s revenue trend, BitFuFu's total revenue has grown at an impressive ~66% CAGR since 2021. In the latest financial result , BitFuFu recorded $129.4 million in total revenue for Q2 2024 - which is a 69.7% YoY increase and a noteworthy feat, considering the effects of the April 2024 halving event on the mining industry. BitFuFu’s full-year revenue in 2021 was $103 million. In 2022 revenue grew by 92%, bringing the full-year 2022 revenue to $198 million. In 2023 revenue grew by 43%, reaching $284.1 million for the full year . BitFuFu is already on track to surpass 2023 full-year $284.1 million revenue by a significant margin because the revenues recorded so far in Q1 2024 and Q2 2024 totals $273.8 million, which already nearly matches the 2023 full-year revenue. With such performance in the first half of 2024 alone, if we extrapolate the sales figure for the year we can make a valid assumption that BitFuFu is on track to maintain the same impressive 66% CAGR or even higher for the 2024 fiscal year. In our extrapolation, we still have to keep risk factors like market volatility and macro factors at the back of our minds. With these factors in mind, and assuming other factors remain constant, I believe that this assumption isn't far-fetched. Historically, BitFuFu has recorded slightly higher revenue in the second half of the year compared to the first half, which is in line with this revenue extrapolation. Net asset trend (Author) On the liquidity front, BitFuFu has managed its balance sheet impressively. BitFuFu has achieved one of the best fleet efficiencies without a heavy balance sheet leverage, and has consecutively maintained a positive net asset since 2022, and still maintained a positive net asset in Q2 2024, despite the impact of the April 2024 halving on the mining industry. Total assets in Q2 2024 was $293.2 million. Total liabilities was $175.43 million, resulting in a net asset of $117.77 million. Cash, cash equivalents, and digital assets held by BitFuFu at the end of Q2 was $155 million, implying a healthy short-term and long-term liquidity position. BitFuFu’s cloud mining business model is an advantage for BitFuFu's ongoing liquidity. The cloud mining segment provides BitFuFu with active working capital as users subscribe to Bitcoin cloud mining services. As users pay upfront to subscribe to cloud mining services, it generates immediate cash inflow for BitFuFu, which can be used to fund ongoing operations. Mining fleet efficiency trend overtime (BitFuFu) Since Q2 2022, BitFuFu has scaled its hosting capacity by more than 500%, which was at 100 MW in Q1 2022 and at 522 MW as of the end of Q2. BitFuFu’s mining capacity has also grown from 3.0 EH/S in Q1 2022 to 24.7 EH/S as of the end of Q2. BitFuFu's mining capacity growth has been matched with improved fleet efficiency. BitFuFu's mining fleet has recorded reduced Joules per Terahash (J/Th) values over the quarters stands at ~21.1 J/Th. This is proof of BitFuFu's expertise in scaling resources to achieve better efficiency. At an average fleet efficiency of 21.1 J/Th, BitFuFu currently boasts one of the lowest joules per terahash value (best fleet) in the industry. The joules per terahash metric simply shows how much electricity a miner’s fleet consumes per terahash of hashrate. The less electricity consumed, the better it is for the miner’s operations. Hence, lower Joules per terahash means better efficiency. How BitFuFu Stacks Up to Peers In terms of production capacity and efficiency, BitFuFu stacks up high in the industry. As mentioned earlier, BitFuFu’s average fleet efficiency stands at around 21.1 J/Th, surpassing larger mining peers in terms of efficiency. MARA Holdings (former Marathon Digital) ( MARA ) currently averages 23.5 J/Th in efficiency, Bitdeer sees 31.6 J/Th in efficiency, and Hut 8 ( HUT ) has an average efficiency of 31.7 J/Th. Data by YCharts Data by YCharts From a relative valuation standpoint, BitFuFu currently trades at 1.82x P/S ratio and 1.72x EV/Sales. Peers like MARA trade at 7.98x P/S ratio and 9.55x EV/Sales. HUT trade at 3.49x P/S and 4x EV/Sales. A cloud mining peer BTDR trades at 2.31x P/S and 2.92x EV sales. FUFU is currently undervalued to the peer group based on its sales figure, and if we further go by the extrapolated value for full year 2024 potential sales of ~$547 million, forward P/S sales and EV/sales for BitFuFu would be 1.37x and 1.47x respectively. This would make FUFU one of the most undervalued stocks among Bitcoin miners. Risks As reiterated on Bitcoin stocks covered on Seeking Alpha, crypto assets and stocks linked to crypto exhibit a higher amount of price instability. Volatility in Bitcoin's price can also affect the financial standing of mining companies as well, as they typically hold large amounts of Bitcoin on their balance sheet. Takeaway Revisiting FUFU, a “buy” is recommended for this mining stock for investors interested in the Bitcoin mining sector because BitFuFu has maintained its track record of strong operational and financial performance. BitFuFu has plenty of room to scale its operations and grow its business, and its business model allows for such expansion with ease. The cloud mining user base growth, currently 395,000+ registered cloud mining users, bodes well for the company as it provides active working capital for the company when users purchase mining contracts, reducing the need to leverage its balance sheet. With the growing interest in gaining crypto exposure among retail and institutional investors, BitFuFu could turn out to be the star mining company of this Bitcoin market cycle, mainly because of cloud mining.
