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HC Wainwright reiterates Buy rating with $18 price target on CleanSpark, citing strong growth outlook

The analysts said that if the energy project in the Shoreline Unified School District, in Sonoma, comes through it will boost revenue

Cleanspark, Inc. - HC Wainwright reiterates Buy rating, $18 price target on CleanSpark as strong outlook sets company up for growth
HC Wainwright estimates CleanSpark’s revenues to be around $13.7M in FY2020 and to increase to $132.6M in FY2026 at a six-year CAGR of 46.0%

Analysts at HC Wainwright reiterated their Buy rating and $18 price target Thursday on CleanSpark Inc (NASDAQ:CLSK) after the advanced energy software and control technology company reported fiscal first-quarter 2020 results which saw revenue boosted by a growing customer base.

“We believe the company's MoU with the Shoreline Unified School District, in Sonoma, for a mPluse supported microgrid deployment is not yet factored into the outlook. This project, if awarded and deployed, could generate around $2-3M in revenues over the next few years,” wrote HC Wainwright analysts Amit Dayal and Sameer Joshi in a note to investors.   

In January, CleanSpark inked a memorandum of understanding with the Shoreline Unified School District for microgrid assessment and deployment. As part of the deal, the Bountiful, Utah company will evaluate two stages of grid resiliency for the Shoreline Unified School District, which draws students from nearly 450 square miles from around Sonoma County in California. CleanSpark said it will provide its own expertise and mPulse software to maximize the value and resiliency of the microgrid.

CleanSpark will begin the first assessment in January and present the feasibility report to the school board in March. 

READ: CleanSpark expects equipment orders to reach $7M in 2020

The analysts were also enthusiastic that the company indicated that it expects around $200K from its 10-year exclusive agreement with International Land Alliance (IAL) this fiscal year for providing its microgrid Value Stream Optimizer (mVSO) for system design and engineering.

“We believe larger contributions driven from this partnership should materialize in future periods as deployments are undertaken,” said the analysts.

“We believe the company's p2klabs acquisition is indicative of the company's strategy to emerge as a software play over the next few years.”

The analysts also noted that the company's recent Nasdaq uplisting should provide “greater exposure” to institutional investors.

For the quarter ending December 31, the firm posted revenues of nearly $1 million compared to $262,907 during the year-ago period. Gross profit came in at $94,103. The firm narrowed its net loss to $1,916,254 from $2,283,551 a year prior. Net loss per share improved by $0.23, coming in at $0.40.

The company ended the quarter with $6.4 million in cash and had debt of approximately $4.6 million on the balance sheet.

Strong valuation

The analysts offered a strong valuation for the company.

“We are estimating CleanSpark’s revenues to be approximately $13.7M in FY2020 and expect these to increase to $132.6M in FY2026 at a six-year CAGR of 46.0%,” wrote the analysts.

They expect the company to begin generating positive EBITDA, or earnings before interest, taxes, depreciation, and amortization in FY2022.

“We arrive at our $18 price target using a discounted cash flow model that uses a discount rate of 15.5%, derived from the company’s weighted average cost of capital,” said the analysts.

Separately, CleanSpark revealed Thursday that it expects $7 million in equipment orders in 2020 as the company secures a $117,000 follow-on order for its generator breaker panels to function within a distributed energy system configured with other company components and technologies.

CleanSpark, based in Utah, makes software that allows an energy microgrid to be scaled to the user's specific needs and implemented across commercial, industrial, military and agricultural sectors.

Contact the author Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

Quick facts: Cleanspark, Inc.

Price: 1.2 USD

NASDAQ:CLSK
Market: NASDAQ
Market Cap: $5.84 m
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