This Christmas was surely a merry one for owners of Bitcoin.
One of the most promising of such companies is Northern Data AG, listed on the German stock exchange (XETRA: NB2, ISIN: DE000A0SMU87). The stock offers both: upside participation if Bitcoin price goes up, but also strong resilience against downside because of a great base case, which is independent of Bitcoin price.
THE BASE CASE ALREADY OFFERS SIGNIFICANT UPSIDE INDEPENDENT FROM BITCOIN PRICE…
Most importantly: all customers pay fixed service fees to Northern Data, and this revenue is independent of the development of the client’s business – in the case of their Bitcoin mining clients, this revenue is independent of Bitcoin price movements. With this fixed-basis revenue alone, the company plans to achieve revenues of EUR 350 million to EUR 400 million and an EBITDA between EUR 100 million to EUR 125 million in 2021. Hence, Northern Data is valued at only around 10 times 2021 EBITDA, significantly lower than many peers.
…. AND THE UPSIDE FROM RISING BITCOIN PRICES IS THE ICING ON THE CAKE
Additionally, new clients are rushing towards Northern Data like there is no tomorrow. Northern Data is the only data center provider in the world which is able to offer BTC mining services at such a scale. All existing clients are already making use of several-hundred-Megawatt capacities each. Taking all clients together, this should be the largest Bitcoin mining cluster in the world. And Northern Data’s site in Texas can service up to 3.6 Gigawatts (!) in the medium term.
PLENTY OF UPSIDES
Most comparable companies are valued around 20 -30 times EBITDA. From this point of view, the stock can easily double and more. And the company has stated that the guidance is rather conservative, so we expect it to be increased in Q1 2021. German Investment bank Hauck & Aufhaeuser has set a short-term price target of EUR 120/share, US investment bank Stifel of EUR 90/share.