As of Thursday, October 16, the stock price of Cipher Mining (CIFR) had increased by 10.3% compared to the previous Friday’s close. According to S&P Global Market Intelligence, the cryptocurrency mining stock had reached a weekly gain of 24.7% earlier in the day. It is worth noting that during the same period, the price of Bitcoin fell by 7.2%. Since mining is the company’s core business, Cipher’s stock price typically moves in sync with Bitcoin, making this week’s divergent performance noteworthy.
The recent rise in Cipher’s stock price appears to be a continuation of a larger trend. Over the past two months, its stock price has surged by a total of 282%, driven firstly by a strong mining report, and secondly by a large contract unrelated to its cryptocurrency mining operations. On September 25, Cipher signed a 10-year agreement with Fluidstack, an AI training expert funded by Alphabet’s Google division. On the day the news was announced, the company’s stock price rose by over 10% and has largely maintained an upward trend since then.
Cipher is actively diversifying its data center operations, adding AI training services to its original Bitcoin mining systems. Additionally, the company resells its excess electricity, as selling these resources sometimes yields higher profits compared to its AI and Bitcoin businesses. Despite its business expansion, Cipher continues to add hardware to its Bitcoin mining equipment, which enabled a 51% year-over-year increase in Bitcoin production in August. This flexible business plan allows it to leverage two different high-growth businesses based on changes in the market environment.
However, while there is positive news on the business front, attention must also be paid to its financial condition. Cipher’s stock appears very expensive, with a price-to-sales ratio as high as 43. The company is still operating at a significant loss and sold approximately 16% of its self-mined Bitcoin to cover operating expenses.
Looking back at recent trends, there is not much mystery behind Cipher’s stock rise on Wednesday, when its price increased by nearly 12%, easily overcoming market lows. This performance surpassed the S&P 500 index’s 0.6% gain that day. The catalysts for its rise mainly came from two aspects: the strong performance of the cryptocurrency it mines and the company’s encouraging operational update. Bitcoin, the foundational cryptocurrency of its business, rebounded on Wednesday after a minor pullback. The increase in Bitcoin’s value directly benefits the stock prices of mining entities.
Additionally, after the market closed on Tuesday, Cipher Mining released its regular operational update for September. The market responded positively to the published data. Although the total number of mining machines deployed decreased slightly from 115,000 in August to 114,000 in September, its Bitcoin production for September increased to 251 from 241 in August. Meanwhile, the amount of Bitcoin sold by the company during the month significantly increased to 158, far exceeding the 42 sold in the previous month.
Although these month-over-month figures are encouraging, investors should recognize that Cipher Mining is rapidly moving away from a business model solely reliant on Bitcoin mining. Like some of its peers, it is actively leveraging its existing assets to diversify into currently hot areas such as artificial intelligence and high-performance computing infrastructure hosting.
