BitFuFu: Punished For A Bad Quarter, Poised For A Powerful Re-Rating

Summary The market has unfairly punished BitFuFu for a dismal Q1, but a closer look reveals the operational challenges that caused the slump were temporary. Recent operational data from April and May confirms a powerful turnaround is already underway, showcasing an exponential rebound in hashrate and a sharp recovery in Bitcoin production. BitFuFu trades at a glaring valuation disconnect from its U.S. peers, with the market assigning a value to its hashrate that is a mere fraction of the industry average. This significant market misunderstanding has created a compelling arbitrage opportunity, leaving room for a substantial valuation re-rating as the company heads into its Q2 earnings report. Just over a month ago, I claimed that BitFuFu Inc. ( FUFU ), a Singapore-based crypto miner, was well on track for strong operating income growth in 2026. FUFU stock has lost almost 20% since then after the company reported lackluster earnings for the first quarter, characterized by a 46% YoY decline in revenue, primarily attributable to the bitcoin halving event in April last year. All else equal, bitcoin halving negatively impacts miner revenue, which is something crypto investors are well aware of now. After going through BitFuFu’s April and May performance data, I am confident that the company is among the few crypto miners that are operationally ready to thrive amid increasing mining difficulty. As such, I find BitFuFu’s market valuation materially disconnected from its economic value at a time when it’s valued at a substantial discount to its closest peers, presenting an arbitrage opportunity for investors. BitFuFu’s Challenging First Quarter The fourth bitcoin halving in April 2024 has materially impacted the comparable revenue growth of crypto miners of every scale and size. BitFuFu’s Q1 revenue declined from $144.4 million a year ago to just $78 million, showcasing this massive impact. Not only has BitFuFu felt the impact, but larger players like MARA Holdings ( MARA ) and Riot Platforms ( RIOT ) also reported substantial net losses in Q1. MARA’s net loss in Q1 totaled $533.4 million, and RIOT reported a net loss of $296.4 million. BitFuFu, on the other hand, reported a net loss of $16.9 million. However, bitcoin halving is not the only factor that has impacted revenue negatively. While peers such as MARA and RIOT mitigated the bitcoin halving impact through substantial operational expansions that led to robust hashrate growth, BitFuFu suffered a temporary decline in the hashrate under management as well (hashrate dropped 28% YoY to 20.6 EH/s from 28.6 EH/s). This paved the way for a truly lackluster Q1 performance. In its Q1 earnings release, BitFuFu reported that this temporary decline in the hashrate came on the back of the expiration of some hashrate purchase orders and miner relocation. While BitFuFu’s peers made the most of surging bitcoin prices, the company was not in a position to capitalize on this price increase as self-mined bitcoin production declined staggeringly from 1,103 in Q1 2024 to just 186 in Q1 2025. Exhibit 1: BitFuFu’s Q1 Performance Metrics Q1 Earnings Release The below table summarizes how BitFuFu fell behind its closest peers in the first quarter. Company Q1 2025 YoY revenue growth Q1 2025 hashrate growth Q1 2025 YoY BTC production change Comments BitFuFu -46% -28% -83% (self-mining) Revenue was impacted by bitcoin halving and a substantial yet temporary drop in hashrate. Riot Platforms 100% 172% 12.2% Substantial hashrate growth helped Riot overcome the halving impact. Mara Holdings 30% 95% -19% Hashrate growth helped mitigate the halving impact, but revenue growth mostly came from higher BTC prices. Source: Company Filings At first glance, you might feel BitFuFu is losing ground. However, as I reveal in the next segments of this analysis, FUFU stock has been punished for a temporary deterioration in its financial performance. This market misunderstanding is exactly what sets the stage for an arbitrage opportunity. April/May Data Confirms BitFuFu’s Rebound As we inch toward the end of the second quarter, we already have access to BitFuFu’s April and May performance data that confirms, without a shred of doubt, that the company has well and truly recovered from the challenges faced in Q1. Encouragingly, the rebound is across all key operational metrics, which confirms that BitFuFu is headed in the right direction. The most direct, meaningful evidence of this recovery comes in the form of a significant improvement in the hashrate under management. From just 20.6 EH/s at the end of Q1, hashrate grew 37% MoM to 28.3 EH/s in April, followed by another strong 21% MoM increase to 34.1 EH/s in May. Based on these numbers, within just two months from the end of the disappointing first quarter, BitFuFu’s hashrate under management has grown exponentially to surpass Riot Platform’s Q1 deployed hashrate of 33.7 EH/s. Along with the hashrate under management, bitcoin production has also rebounded sharply after a sluggish Q1. In Q1, the company produced a total of just 723 BTC (186 BTC from self-mining and 537 BTC from the cloud-mining segment). In April, BitFuFu mined a total of 209 BTC , followed by 400 BTC mined in May , bringing the total BTC production to 609 in the first two months of the quarter. Based on these numbers, BitFuFu seems well on track to produce a meaningfully higher number of BTC in the second quarter, assuming this trend remains strong. The strong performance in May was driven by the contribution from the hashrate purchased in late April, and a similar feat could be expected in June as the company purchased additional hashrate in late May as well. Importantly, the average daily BTC production increased from 7 in April to 12.9 in May, suggesting that the robust increase in hashrate is already contributing positively. BitFuFu’s strong growth in April and May corresponded to a robust increase in the power infrastructure as well, which gives me confidence that the observed hashrate growth is well-supported from a power requirement perspective. At the end of Q1, the company had a power capacity of 478 MW, a notable decline from 644 MW of power capacity as of Q1 2024. Since then, however, the trend has turned positive, with power capacity growing 18% MoM in April to 566 MW, followed by another 15% MoM increase in May to 651 MW. This continued increase in power capacity highlights the progress in BitFuFu’s strategic plan to reach 1 GW of power capacity by 2026. Exhibit 2: BitFuFu’s Power Capacity June Presentation Taking a closer look at BitFuFu’s strategic BTC holdings, which form the backbone of its treasury strategy, reveals that the management is following the best course of action to drive shareholder returns higher. After seeing an increase in BTC holdings from 1,835 in March to 1,908 in April, the company sold 178 BTC at an average price of $104,000 in May to capitalize on the recent run-up in bitcoin prices. At the end of May, BitFuFu held 1,709 BTC. BitFuFu’s performance in April and May, in my opinion, foreshadows how the company could grow profitably in the post-bitcoin halving environment by focusing on operational efficiency and access to low-cost power. These two variables will play a key role in determining the profitability of every bitcoin miner in the long run, and I am confident that BitFuFu is headed in the right direction on this front. The Valuation Disparity Highlights The Opportunity For A Re-Rating BitFuFu is significantly undervalued from a comparable valuation perspective. I believe this undervaluation primarily stems from the company’s unique business model, as it generates the bulk of its revenue from cloud-mining services. This unique business model also involves securing a major portion of its total hashrate from third-party suppliers. In comparison, stock market darlings such as Riot Platforms, Mara Holdings, and CleanSpark have a more straightforward business model where they have positioned themselves as bitcoin miners. This business model differentiation may have contributed to the market seeing BitFuFu as a riskier business compared to its peers. Another factor that may have contributed to the comparable undervaluation is BitFuFu’s Singapore origins. All of the competitors I discussed above are headquartered in the U.S., which naturally boosts their investment appeal. BitFuFu’s smaller scale from a BTC ownership perspective compared to its peers may have also played a part in this relatively cheap valuation. As of May 31, FUFU held 1,709 BTC compared to 19,225 for Riot, 49,179 for Mara, and 12,502 for CleanSpark according to the most recent data. While this smaller scale may spook some investors, in reality, this should not be a dealbreaker, given that BitFuFu is executing its strategy well. To realistically estimate BitFuFu’s intrinsic value, I thought it’s best to use a Market Cap/Hashrate comparison of its American peers and then apply a valuation discount to reflect the factors discussed above. Before that, let’s see how BitFuFu compares with its peers across a few important metrics. Metric FUFU RIOT MARA CLSK Peer Average Stock price $3.17 $10 $14.98 $10.6 – Market capitalization $535 million $3.58 billion $5.24 billion $2.82 billion – TTM revenue $397 million $459 million $705 million $537 million P/S multiple 1.35x 6.41x 6.57x 4.88x 5.95x Hashrate 34.1 EH/s 35.4 EH/s 58.3 EH/s 45.6 EH/s Market cap/hashrate $15.68 million/EH $101.13 million/EH $89.87 million/EH $61.64 million/EH $84.21 million/EH Note: Stock Price Data as of June 26. Looking at this table, FUFU’s disconnect from the peer group is evident. At a P/E multiple of 1.35x, FUFU is significantly undervalued compared to the peer average of almost 6x. The undervaluation is even more evident by the fact that the market is attaching a value of $15.68 million per EH for BitFuFu whereas the peer average is over $80 million. Given the limitations that I discussed earlier, I believe a 30% discount to the peer average is warranted, which gives us a target fair value of $58.95 million/EH. Based on BitFuFu’s current hashrate of 34.1 EH/s, the implied market cap comes to $2.01 billion. Based on 163.2 million shares outstanding, the per-share intrinsic value estimate comes to $12.32, which implies an upside potential of almost 300%. Even after applying a valuation discount to account for company-specific limitations facing BitFuFu, the company seems substantially undervalued in the market, which makes FUFU stock an attractive bet for investors looking to gain exposure to bitcoin. Takeaway BitFuFu, after a disappointing Q1 performance, is attractively valued in the market compared to other publicly traded bitcoin miners. The short-term challenges that led to this lackluster Q1 performance seem to have passed, and the company has shown resilience in the first two months of the second quarter. The market seems to have misunderstood the growth potential of BitFuFu, leaving room for a valuation re-rating once the Q2 earnings report is out. Key risks to monitor include the company’s reliance on third-party hashrate providers, execution risks facing vertical integration efforts involving data centers, and the revenue volatility arising from its reliance on cloud mining.

Source: Seeking Alpha