Analysts predict Bitfarms stock doubling after Riot settlement

HC Wainwright analysts believe Bitfarms shares are set to grow following the agreement reached with Riot Platforms, which ended a six-month-long hostile takeover attempt.

Previously on September 23, Bitfarms and Riot Platforms reached an agreement to end Riot’s bid to acquire the Canadian Bitcoin (BTC) mining company.

According to analysts at HC Wainwright, Bitfarms’ stock should reach $4 per share. In a note shared with Crypto.news, the analysts maintained their “Buy” rating on Bitfarms’ stock, viewing it as undervalued.

At the time of writing, Bitfarms’ stock (NASDAQ: BITF) is trading at $2.06 per share. Analysts have noted that based on their 2024 revenue estimates, Bitfarms’ stock is trading at a roughly 40% discount to other Bitcoin mining companies.

Details of Bitfarms deal

The deal ends Riot’s pursuit of Bitfarms, which began in April when it offered $950 million to acquire Bitfarms, an offer that was rejected by Bitfarms’ board of directors as undervalued.

After the rejection, Riot purchased 19.9% ​​of Bitfarms’ outstanding shares and attempted to change the board structure through a special shareholder meeting, but that move has now been withdrawn as part of the deal.

Under the agreement, Bitfarms will increase its board to six members and nominate an independent director, with Riot agreeing to support all proposed measures. Riot will also gain the right to purchase additional Bitfarms shares, provided it owns at least 15% of the outstanding shares.

Analyst’s thoughts

According to analysts, this deal is a significant gain for Bitfarms, meaning that a significant burden on the company’s shares will be removed.

Analysts noted that Bitfarms can now focus on its 2024 growth strategy, aiming to reach 21 exahashes per second by the end of next year. They see this as a critical step for Bitfarms to regain investor confidence and execute its expansion plans without distraction.

Analysts also believe that this deal will benefit Riot because it will avoid the possibility of getting into a costly proxy fight with Bitfarms.

The analysts’ $4 price target is based on a 6.5x enterprise value-to-revenue multiple for 2024, which is in line with valuations applied to other Bitcoin mining peers. However, they warn that risks remain, including Bitcoin price volatility, construction delays, and potential shareholder dilution.

Following the agreement, Bitfarms shares rose by 1.7% and Riot shares rose by 1.3%, indicating that the market reacted positively to the decision.