Rosenblatt Securities analyst Chris Brendler maintained TeraWulf (NASDAQ:WULF) with a Buy and lowered the price target from $10 to $4 on Wednesday.
TeraWulf fits perfectly into Brendler’s Bitcoin mining investment thesis with low power costs, an efficient fleet and a strong balance sheet. Even better, it is one of only three miners to actually sign an HPC deal. Yet the stock has underperformed peers in the recent sell-off due to concerns about its ability to execute and sector-wide worries about the size of the AI opportunity.
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Brendler is bullish on both and expects TeraWulf stock to revalue as it powers up Phase 1 later this year and signs additional deals to scale the business.
At the same time, however, Bitcoin mining profitability has dropped dramatically, and current market conditions make it tough to be optimistic about new HPC capital commitments.
Fortunately, the analyst noted that the stock is discounting a lot down here, and TeraWulf should have to execute for it to revalue.
Of all the mining startups that launched in the 2021 bull market, TeraWulf arguably had the most power expertise.
Founded by CEO Paul Prager, TeraWulf’s executive team has had decades of success in developing, acquiring, and managing power generation facilities at Beowulf Energy, where Prager is still CEO. Over its 30-plus year history, Beowulf has become known for expertise in managing large-scale energy assets and integrating cutting-edge technologies into traditional energy systems. With this deep power experience, TeraWulf’s power-first approach has proven to be a critical differentiator, first in Bitcoin mining and now in HPC.
In Brendler’s recent sector initiation report, he favored miners pivoting to HPC due to its superior growth and profitability characteristics. The market supported this view, as HPC-related stocks dramatically outperformed following the June 2024 announcement of the Core Scientific, Inc (NASDAQ:CORZ)/CoreWeave, Inc (NASDAQ:CRWV) deal.
Since rallying to start 2025, the analyst had noted significant pressure on miner-turned-HPC stocks as the market has become increasingly skeptical of the AI opportunity.
In addition to sector-level concerns, Brendler also heard doubts about TeraWulf’s ability to execute and the strength of its partner, Core42. As a result, after becoming the second public miner to sign a long-term deal with a hyperscaler last year, the best-performing stock in the sector has underperformed so far in 2025.
Brendler noted this sell-off is overdone. He said TeraWulf’s HPC pivot will prove successful for several reasons.
First, the analyst is highly confident in TeraWulf’s ability to execute the first phase due to its power expertise and the project’s manageable size (72 MW). Second, he noted Core42 is an ideal partner. Although not as accomplished or well-known as CoreWeave, Core42 is the digital infrastructure subsidiary of G42, the well-funded (and state-sponsored) leader in AI development in the UAE.
Third, although Core42’s 135 MW option expired at the end of the first quarter of 2025, recent meetings with management suggested a high degree of confidence in not only 2025 but also TeraWulf’s annual 150 MW/year target through 2027.
Brendler expected TeraWulf’s HPC business to exceed market expectations and help the stock rebound.
Although TeraWulf has formally deemphasized the mining business, it still provides 100% of revenue and profitability today. TeraWulf ended 2024 with 9.7 EH/s of mining capacity, which should grow to 13.1 EH/s thanks to 15,000 Bitmain S21 Pros expected to be installed in the first quarter of 2025.
With an impressive 15 J/TH efficiency, TeraWulf’s fleet should be among industry leaders at just 18.1 J/TH by the first quarter of 2025. This is excellent timing since TeraWulf’s power costs no longer benefit from the sub-$0.03 per kWh at Nautilus since TeraWulf sold its 50% joint venture interest in October 2024. At this point, management does not expect to expand its mining operations and, as such, no longer provides monthly mining updates.
The shift to HPC can’t come soon enough, as Bitcoin mining economics have been crushed recently, with the network hash rate spiking to new highs. With Bitcoin falling below $80,000, the hash price has fallen below $40/PH/day for the first time.
In Brendler’s sector update yesterday, his mining estimates fell sharply across his coverage since his new network forecast includes a ~20% drop in miner profitability.
As a result, his TeraWulf estimates are materially below consensus, with 2025 and 2026 revenue of $195 million and $340 million and adjusted EBITDA of $17 million and $133 million.
Fortunately, much of this outlook is already reflected in the stock price, and Brendler noted significant catalysts ahead.
Given the skepticism around its HPC initiatives, TeraWulf would need to execute Phase 1 to help the stock revalue.
Improving Bitcoin mining profitability would also help, and the analyst noted there is a strong possibility that his new network forecast proves conservative.
Although the current macro environment makes optimism difficult, TeraWulf’s significant cash position should help it weather the storm.
WULF Price Action: TeraWulf stock is up 11.15% at $2.51 at publication on Wednesday.
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