Hut 8’s AI data center deal is bigger than meets the eye: Benchmark lifts price target to $85
TL;DR
Benchmark analyst Mark Palmer raised Hut 8's price target to $85, citing its $7 billion AI data center deal with Google-backed payment guarantees and expansion options potentially worth $17.7 billion. The deal marks Hut 8's shift to institutional-grade digital infrastructure with lower risk.
Key Takeaways
- •Benchmark raised Hut 8's price target to $85 (from $78) with a buy rating, citing 93% upside potential.
- •Hut 8's $7 billion, 15-year AI data center lease includes Google payment backstops and expansion options potentially increasing value to $17.7 billion.
- •The deal represents Hut 8's strategic shift from crypto mining to institutional digital infrastructure with superior economics.
- •Analysts highlight reduced counterparty risk due to Google's involvement and no equity dilution compared to peer deals.
- •Multiple brokerages have raised price targets following the announcement, with shares gaining up to 20%.
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What to know:
- Benchmark analyst Mark Palmer said Hut 8’s $7 billion, 15-year Fluidstack lease at River Bend underscores its shift toward institutional-grade digital infrastructure.
- Google’s payment backstop and expansion/renewal options could see the potential contract value rising to about $17.7 billion, according to Palmer.
- Palmer raised his Hut 8 price target to $85 from $78 and reiterated his buy rating on the stock.
- Benchmark analyst Mark Palmer said Hut 8’s $7 billion, 15-year Fluidstack lease at River Bend underscores its shift toward institutional-grade digital infrastructure.
- Google’s payment backstop and expansion/renewal options could see the potential contract value rising to about $17.7 billion, according to Palmer.
- Palmer raised his Hut 8 price target to $85 from $78 and reiterated his buy rating on the stock.
Wall Street broker Benchmark said bitcoin miner Hut 8 (HUT) is using last week’s River Bend announcement to cement a shift from a crypto-first power owner into an institutional-grade digital infrastructure platform.
Analyst Mark Palmer said the structure, counterparties and cash-flow quality separate HUT's deal from the wave of recent AI data center agreements. He reiterated his buy rating on the stock and lifted his price target to $85 from $77, suggesting 93% upside from Friday's close of $44.12. Shares are higher by 2.8% premarket to $45.34.
Last Wednesday, Hut 8 signed a $7 billion, 15-year AI data center lease with Fluidstack for its RIver Bend data center in Louisiana. Shares gained as much as 20% following the news.
"The transaction combined superior deal economics relative to peer deals, long-dated, investment-grade-backstopped cash flows, and multiple layers of embedded expansion optionality across three counterparties," Palmer said.
Palmer's sum-of-the-parts (SOTP) valuation includes the River Bend lease value, potential future expansion capacity under a right of first offer granted to Fluidstack, Hut 8’s stake in American Bitcoin Corp. (ABTC), and the bitcoin held on its balance sheet as of Sept. 30.
Palmer said a key point is timing. Management didn’t rush to monetize power assets early in the AI infrastructure land grab, waiting instead for a configuration that met internal return hurdles and strategic criteria.
He flagged the 15-year payment backstop from Google (GOOG) as a meaningful de-risking feature that, in his view, lowers counterparty risk while allowing Hut 8 to keep full economic ownership without warrants or equity sweeteners that have shown up in other deals.
The report noted that three five-year renewal options could lift total contract value to about $17.7 billion.
Benchmark said it values the initial 245 megawatt (MW) River Bend tranche at roughly $7.6 billion, reflecting contracted cash flows and the scarcity value of AI-ready power supported by an investment-grade backstop.
Rival broker Cantor Fitzgerald last week raised its Hut 8 price target to $72 from $64, while Canaccord raised its target to $62 from $54.
Read more: Hut 8 price target boosted at Cantor and Canaccord after Google-backed AI deal
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