B. Riley has pointed out that IREN, despite a 47% drop from its 52-week high on November 5, still represents a potential buying opportunity. Investment analysts Nick Giles and Fedor Shabalin maintained a buy rating with a price target of $74, despite the company’s underperformance compared to its mining and high-performance computing (HPC) peers.
Current Market Analysis
The average decline for miners over the same period is approximately 25%. In particular, GPU cloud companies CoreWeave (CRWV) and Nebius (NBIS) posted declines of 31% and 25%, respectively. B. Riley’s report suggests that the recent price actions for IREN are more reflective of changing market sentiment rather than underlying operational issues.
Stock Performance and Rebound Potential
- As of the latest trading session, IREN shares fell 8.2% to $36.82.
- Between October 22 and November 5, IREN experienced a 47% rally, contrasting with a 13% increase in its HPC peer group during the same timeframe.
- CoreWeave recorded a 6% decrease, while Nebius saw a 19% gain during this period.
B. Riley noted that IREN’s stock shows a tendency to experience significant fluctuations, which can provide favorable entry points for investors despite potential volatility. The analysts propose that the current decline offers a chance for investors willing to navigate the cyclical nature of this sector.
Funding and Capital Requirements
Despite its challenges, IREN is facing a significant funding gap of approximately $2.7 billion. This gap stands against an anticipated $11.6 billion in capital expenditures for HPC, including:
- $900 million for 23,000 GPUs at Prince George.
- $1.85 billion for 40,000 GPUs at Mackenzie and Canal Flats.
- $8.8 billion for 76,000 GPUs associated with Microsoft at the Childress campus.
Currently, IREN has about $8.85 billion in capital secured, including:
- Microsoft’s prepayment of $1.94 billion.
- Approximately $2.5 billion in financing tied to the Microsoft-related GPUs.
- About $1 billion in cash and cash equivalents.
Recent Financial Moves
Recent actions on IREN’s balance sheet include:
- About $2.3 billion in new convertible senior notes due between 2029 and 2033.
- The successful raising of approximately $2.27 billion from a convertible deal, which also funded a $201 million capped call.
- A direct offering of 39.7 million ordinary shares at $41.12 per share on December 2, completed December 8.
B. Riley’s analysis indicates that the recent downturn in IREN stock is primarily due to weaker sentiment in the AI sector rather than a fundamental shift in the company’s operations tied to Microsoft’s GPU expansion. This downturn may offer investors an opportunity to acquire shares ahead of a possible revival in market enthusiasm for AI technologies and ongoing advancements in IREN’s HPC projects.
