Hut 8 price target boosted at Cantor and Canaccord after Google-backed AI deal

Cantor Fitzgerald analyst Brett Knoblauch on Wednesday raised his price target on Hut 8 (HUT) to $72 from $64 following the company’s announcement of a $7 billion lease agreement with AI infrastructure firm Fluidstack.

“We believe this is a deal the market has been waiting for,” Knoblauch wrote in a note to clients, calling the finalized terms stronger than initially expected. He pointed to the 15-year duration, a power usage effectiveness (PUE) ratio of 1.35, and projected net operating income of $6.9 billion over the base term as key highlights. If all renewal options are exercise, Knoblauch added.

His new price target of $72 suggests about 80% upside from Hut’s Wednesday close of $40.

The 15-year deal, signed for 245 megawatts (MW) of power capacity at Hut 8’s River Bend data center in Louisiana, is backstopped financially by Google (GOOG.)

Under the agreement, Google has committed to covering lease payments and operating expenses, including energy, maintenance and taxes, providing a strong credit foundation for the contract. The lease also includes three 5-year renewal options that could raise the total contract value to $17.7 billion.

The focus now shifts to execution. Hut 8 has 900 MW under development and another 1,255 MW under exclusivity. Knoblauch said the company’s ability to bring together energy providers, government approvals, financing and tech partners shows it’s well-positioned to keep scaling beyond its crypto roots.

While bitcoin BTC$86,817.46 holdings have weighed on Hut 8’s balance sheet in recent months, Knoblauch said the data center deal more than offsets those declines. “We remain confident that this will be the first of many deals for HUT,” Knoblauch wrote.

Canaccord Genuity also hikes

Based on the Fluidstack contract terms, the team at Canaccord now values Hut’s River Bend site at $22 per share, up from $14 previously. Accordingly, the firm lifted its price target for HUT to $62 from $54.

“We previously raised the target price for HUT in early November, but with the completion of the River Bend contract signing, we are adjusting it upward once again,” they wrote. “Our preliminary DCF model reflects the most up-to-date information on the value of the River Bend project, incorporating the pricing and transaction terms disclosed by the company yesterday.”

HUT is higher by 1.8% in premarket trading following yesterday’s 9% gain.