Existing Bitcoin mining customer expands contract volume

These days are eventful ones for Bitcoin-lovers. And not just the ones who held on to their Bitcoins during the dark times get rewarded. Also, the Bitcoin mining industry is booming. 

Hidden giant is Germany’s Northern Data (listed on the German stock exchange; XETRA: NB2; ISIN: DE000A0SMU87), a leading provider of high-performance computing (HPC) solutions. Northern Data offers a full-service solution for Bitcoin Miners, from hardware purchase to data center operations. 

Today, the company announced the extension of a customer contract with a volume of ASIC chips worth USD 100 million. The existing customer has made use of an extension option, which it drew at the end of the year. The USD 100 million order volume of ASIC chips corresponds to additional capacity of more than 200 MW, which will be allocated to Northern Data’s up-to-five new Scandinavian and Canadian data center locations, among others. 

1 Gigawatt Bitcoin mining operations

In total, Northern Data now soon should have almost 1 GW Bitcoin mining operations up and running for a diverse group of clients like Japanese conglomerates SBI and GMO and Blockchain giant Block.one. This should make Northern Data’s cluster the largest Bitcoin mining operation in the world.

While Northern Data is protected from volatility of Bitcoin prices by a base fee with its mining customers, the company also benefits from a performance-based remuneration component on top of the basic fee. In a statement issued this morning, CEO Aroosh Thillainathan emphasizes that this additional revenue driver is not included yet in the company’s forecast for 2021 and therefore represents additional significant upside potential. As recently as mid-December, the company had forecast revenues of EUR 350 million to EUR 400 million with EBITDA of EUR 100 million to EUR 125 million for the 2021 financial year, which has just begun.

Eight years of experience

Northern Data attributes its market leadership to its eight years of experience in the field of infrastructure for HPC applications such as bitcoin mining. In these years, Northern Data has developed many proprietary technologies, including an innovative air-cooling system developed in-house, as well as artificial intelligence for controlling and optimizing the operation of the HPC hardware. 

Stock has significant upside potential

According to analysts, the stock offers plenty of upside: Most comparable companies are valued around 20 -30 times EBITDA. From this point of view, the stock can easily double and more, with Northern just being valued at around 10 times 2021e EBITDA – based on the conservative guidance, which most likely will be increased soon. German investment bank Hauck & Aufhaeuser has set a short-term price target of EUR 120/share, US investment bank Stifel of EUR 90/share.

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