Hut 8 Explodes Higher, But It’s Too Much, Too Quickly

Summary Hut 8 Mining’s stock has surged 86% since April, driven by a strong technical uptrend and bullish momentum indicators. Despite the bullish chart, fundamentals have deteriorated sharply, with revenue and earnings estimates slashed across the board. A new Ontario power contract provides long-term cash flow visibility but introduces operational risks and uncertainty in execution. Given the soaring valuation and rising uncertainty, I am downgrading Hut 8 from Buy to Hold—chart strength is offset by weak fundamentals. An interesting phenomenon has occurred with Bitcoin miners in recent years, in that as a group, they’ve largely been diversifying away from Bitcoin mining and into related fields. One such company that has done a lot of that is Hut 8 Mining (HUT) . The last time I covered Hut 8 was in April, and I was quite bullish. The stock is up 86% since then following a blistering rally. Of course, April 3 rd was just before the low in US equities, so a lot of stocks have posted huge gains since then. Still, I’m taking a victory lap with an 86% gain in three months. Does that make the stock expensive today? Sadly, yes it does. I’m a bit torn on Hut 8 now, so I’m moving from Buy to Hold. The Chart Couldn’t Be More Bullish The old saying in technical analysis is that nothing is more bullish than prices going up. There’s been plenty of that with Hut 8 in the last three months, as we can see a beautiful, steep uptrend channel that’s still very much in play today. StockCharts Unless and until that channel is violated, one can reasonably continue to trade it. The steepness of it dictates that it obviously cannot last forever, but so far so good. The stock is ahead of its moving averages, and the latter are trending steeply upwards. From a momentum perspective, I see nothing but validation for the bulls. The PPO has been in positive, bullish configuration for two months and is strengthening again. The accumulation/distribution line has gone straight up since the weeks prior to the April bottom. The RSI looks very similar to the PPO. There are absolutely zero concerns for the chart right now and it’s unequivocally bullish. Support will be the prior relative high at ~$19.50, and/or the rising 20-day EMA, which is currently $18.16 but rising quite quickly. Any price above those levels is still full steam ahead for the bulls. Fundamentals Are A Different Story I place a lot of value in technical analysis, as anyone who has read my work knows. The chart looks great, but I’m afraid the fundamental situation has deteriorated since my April update. Seeking Alpha Revenue and earnings estimates have been obliterated in a short period of time, making the stock much more expensive on any measurement one can think of. All seven revisions in the past three months have been down, and markedly so. Revenue for 2025 is down ~$35 million, and earnings are down from a loss of 27 cents to a loss of $1.60. For 2027, revenue is down $83 million and earnings from $2.47 to 86 cents. These are massive reductions in revenue and earnings estimates, but the curious thing is that the stock has almost doubled. In this kind of situation, either the stock is just tremendously expensive, or Wall Street – the ones with big buying power to move stocks – simply believes estimates will get better over time. In other words, the fundamentals and the price chart are diverging massively, which means one of them is ‘wrong’. I’m not interested in the task of trying to guess, but the fact that the chart is quite bullish and estimates just aren’t means I’m neutral. What could change that is the quite sizable news that Hut 8 secured a five-year contract in Ontario to run each of its four natural gas-fired power plants with the Ontario Independent Electricity System Operator. The OIESO is a government-backed entity with an AA3 credit rating, meaning the payment risk to Hut 8 is basically nothing. This long-term, highly stable payment stream is terrific for cash flow visibility in the coming years. The agreement is for 310MW of power generation capacity starting on May 1, 2026 at $530 Canadian dollars (~$390 USD) per MW-business day, with the potential for escalations over time. Anyone familiar with Hut 8’s stated strategy will not be surprised by this deal. Investor presentation The company has been focusing on developing its power business, and the Ontario deal is a tremendous success towards achieving that goal. We’ll see how it plays out, but this is exactly what Hut 8 wanted. On the flip side, there are a lot of variables in play that will determine if this venture is ultimately a success. Below we have an example of how Hut 8 accounts for power operations, and there’s a fair amount out of its control. Investor presentation That includes things like the market price and cost of fuel, and to a certain extent, operations and maintenance costs. Now, uncertainty can provide volatility in both positive and negative directions, but before you remortgage your house to run out and buy Hut 8 stock, keep in mind there is a lot that needs to go right between now and May 2031 for this deal to add meaningfully to earnings. I’m not suggesting it won’t happen, but the risk is high and with the share price having exploded higher already, the margin for error is extremely low, in my view. This volatility is exacerbated by the fact that Hut 8’s margins are already extremely volatile. TIKR These are quarterly figures and while we see Hut 8 has done a great job of growing the top line, even gross margins (forgetting about operating margins) have been all over the place. In theory the Ontario deal should help stabilize this. But if there are big fluctuations in some of the variables we looked at above, that may simply make it worse. The company still has Bitcoin mining and compute segments that are also quite volatile. A Soaring Valuation Amid Rising Uncertainty Given that Hut 8 doesn’t have earnings to speak of at the moment, we can try to value it based upon price to forward sales, which is below. TIKR We can see the ramp higher since the April low, which was just over 4X forward sales. We’re at more than double that level now, as the stock price has almost doubled and revenue estimates have gone meaningfully lower. As much as I love the look of the price chart, I simply cannot ignore the fundamental situation including estimates and the valuation. Those two balance each other out; and for me, the stock is a hold today. The chart is too good for a sell rating, but the fundamentals aren’t good enough for a buy rating.

Source: Seeking Alpha