Bit Digital’s Q1 Earnings Bolster The Bull Case

Summary Bit Digital is rapidly transitioning from digital mining to high-growth, high-margin cloud and AI services, with strong progress toward profitability. Technical analysis shows a compelling 10:1 risk/reward setup, with $1.70 as a clear stop and significant upside if momentum continues. The company’s clean balance sheet, robust liquidity, and expanding data center capacity position it for substantial long-term upside. If cloud/colocation buildout stays on track, margin and valuation expansion could drive shares to $5–$6; I rate BTBT a Strong Buy. Digital asset miner and HPC/AI vendor Bit Digital ( BTBT ) posted first quarter earnings on Thursday, and thus far the market reaction has been muted. Earnings for digital miners are messy due to fairly recent accounting rule changes that require mark-to-market “gains” and “losses” on digital assets, but the important thing here is that Bit continues to make progress towards its goal of being a preferred HPC/AI partner going forward. The last time I covered Bit I called it a buy based upon a setup I liked on the chart. That setup ultimately failed, and the stock subsequently fell a bunch. That’s not unlike many charts of US equities since January, but this is why it’s important to always identify stop levels to avoid bag-holding. Today, I think there’s a reasonable amount for the bulls to hold onto here, and I’m still thinking the risk is skewed to the upside. Let’s dig in. Can the bulls wrest control from the bears? That’s the real question here, and heading into the report, Bit had rallied quite strongly. It was enough to turn the 20-day EMA higher, and arrest the decline in the 50-day SMA. Depending upon how trading goes in the next few days, this could be where Bit makes a turn for the better and begins an earnest uptrend. StockCharts That level would be right at $2.11, which is a nickel higher than where it closed prior to the earnings report. If you have a stock above two upward-sloping moving averages, that’s the definition of an uptrend, and Bit is right there. The PPO has come way off of oversold levels to “reset” to the centerline; ideally we’ll see that move into positive territory soon. The RSI is also concerning as there’s been a very clear bearish phase, which I’ve highlighted in red above. We need to see the RSI move to 60 and ideally into overbought territory to really confirm the uptrend. We don’t have those things right now, but we’re close, and that’s how I’m looking at this chart for confirmation that I’m right. If we don’t get those things, I have to assume I’m wrong. Let’s briefly look at the weekly chart as well. StockCharts We have a potential buy signal from the weekly PPO histogram, and we held long-term support at ~$1.70. I absolutely would not hold under that level as if that’s lost, Bit could go much, much lower and quickly. But this chart really highlights the risk/reward, in my view. If we consider there’s ~35 cents of downside to support, but about 10X that amount to the upside, the risk/reward here is excellent. Technical analysis is not about guaranteeing anything. It’s about managing risk and reward, and a 10:1 risk/reward setup is typically extremely difficult to find. We’ll see what happens but I can’t honestly look at these charts and think the risk/reward is anything but favorable. Progress towards long-term goals Bit is on the verge of being profitable, which you might expect given the market cap is just over $400 million. However, the growth that’s projected here is significant to say the least, and if you believe in the HPC/AI route the company is on, it looks pretty cheap. Seeking Alpha The growth in revenue is outstanding, and it is slated to translate into profits starting next year. There’s a lot that can and probably will happen between now and then, but we’re looking at a valuation of 13X projected 2026 earnings, and just 9X on 2027 projections. This thing is hardly priced for perfection. Revisions have been lower, to be fair, but if we see the company’s Bitcoin and Ethereum holdings rise in value, the stock can (and should ) be off to the races higher. Revenue for the quarter was $25.1 million, off 17% year-over-year, driven by a decline in Bitcoin mining, primarily. This was attributable to the halving that occurred in April of last year, as you’ll recall. This was offset partially by growth in Cloud services, as well as the addition of Colocation services revenue. Bitcoin mining revenue was off 64% to $7.8 million in Q1, while Cloud services revenue was up 84% to $14.8 million, and Colocation went from zero to $1.6 million. Further, Ethereum staking revenue was $0.6 million, up 72% year-over-year. For context on the company’s transition, digital mining was 72% of total revenue in last year’s Q1; this year’s Q1 saw that at just 31%. While it was appropriate to think of Bit as a digital miner last year, that’s kind of become a side business at this point. The balance sheet remains quite strong, with $61 million in cash and equivalents, with total liquidity of $141 million. The latter includes cash and equivalents, as well as the company’s other “cash-like” assets, including digital assets at fair value. Adjusted EBITDA was -$44.5 million in Q1, down from a profit of $58.5 million a year ago. Adjusted EBITDA was impacted by $49.2 million in mark-to-market losses on digital assets, which were a $45.7 million gain in last year’s Q1. Bit mined 83.3 Bitcoins during Q1, off 80% year-over-year. This was driven by the halving event last year, higher network difficulty, and a decline in the company’s deployed hash rate following the Coinmint facilities exit. Bit earned 211 Ethereum in native staking for Q1. At the end of the quarter, it held 418 Bitcoin and 24.4k Ethereum, with fair market values at today’s prices of $43.3 million and $63.5 million, respectively. As the company continues to invest in places other than digital mining, the importance of this will continue to diminish. Bit’s active hash rate of 1.5EH/s is uncompetitive among the other Bitcoin miners, and it’s clear the company’s management doesn’t see this as the future of the business. Cloud services continues to see long-term enterprise contracts and short-term workloads from AI-native developers, which management believes will continue to be the case. Bit is deploying NVIDIA’s B200 clusters to boost its competitiveness in this space. Margins in cloud/colocation are also better than digital mining, so as revenue builds in these businesses, we should see the company’s consolidated margins rise over time. If we take all of this into account, we’re looking at the potential for a company with a very clean balance sheet with digital asset price exposure, the financing to build out high growth, high margin businesses, and rising margins. If all of that works out, Bit’s upside could be huge. Investor presentation The roadmap includes up to 80MW of data center capacity by the end of 2026, up from just over nothing today. There’s virtually endless capacity potential here over time, contingent upon how the initial buildout proceeds. This, in my view, is probably why Bit is still trading for two bucks. The uncertainty here of whether we see 10MW by the end of 2025, or 30MW means the range of possibilities is enormous. Uncertainty is not something investors like, and I get it. It certainly appears, however, that the market is somewhat ignoring the risk/reward profile here. The company put this valuation analysis together, so we must take it with a grain of salt. However, there’s a lot of truth here and I don’t think it’s something we should dismiss. Investor presentation It is pretty apparent to me that Bit is continuing to be valued like a Bitcoin miner, but as we saw above, that’s a side hustle at this point. While I don’t think Bit deserves to be valued at the right side of this chart anytime soon (maybe one day), something much closer to the middle is probably what we’re looking at in the coming quarters. This is absolutely contingent upon the buildout of cloud/colocation proceeding as planned, so let’s just make that clear. But if it works, I think Bit has massive upside potential. To wrap it up here, I would not hold under $1.70 (give or take) as that would represent a further breakdown and continuation of the downtrend. But if the cloud/colocation buildout proceeds anywhere close to plan, we could see margin and profit upside, as well as valuation multiple upside. In that scenario, something like $5 or $6 would be fairly easy to achieve, mostly on multiple expansion. Risk/reward here is too good to ignore, and I’m at Strong Buy.

Source: Seeking Alpha