Benchmark raises Hut 8 target to $85, cites stronger cash flows

Benchmark, the Wall Street broker, lifted its price target on Hut 8 to $85 from $78. The firm believes the new AI data center deal between Hut 8, Anthropic, and Fluidstack is a cash flow booster.

Analyst Mark Palmer kept a buy rating and raised his price target to $85 from $78. The revision suggests around 93% upside from Friday’s close of $44.12.

Deal structure sets Hut 8 apart, says Benchmark

On Monday, Palmer said the Hut’s deal stands apart from recent AI data center agreements. It has a better structure, counterparties, and cash-flow quality. At the time of writing, HUT shares rose by 14.21% and closed trading at $50.39.

On December 17, Hut 8 signed a deal with Fluidstack for its River Bend data center located in Louisiana, US. The size of the deal is around $7 billion spread over the next 15 years. The shares of Hut 8 (NASDAQ: HUT) rose by 21% on the news, as reported previously by Cryptopolitan.

Palmer explained, “The transaction combined superior deal economics relative to peer deals, long-dated, investment-grade-backstopped cash flows, and multiple layers of embedded expansion optionality across three counterparties.”

The Benchmark analyst pointed in particular to the 15-year, triple net lease covering the River Bend campus.

In a triple net agreement, the tenant pays expenses like upkeep, insurance, and taxes. This setup gives Hut 8 steadier rental income. It also reduces Hut 8’s risk of unexpected costs during the lease.

The deal includes a 3% annual rent escalator. This allows Hut’s cash flows to grow each year and helps protect returns against inflation.

The deal also benefits from a payment backstop provided by Google. Palmer said this lowers the risk because Google would cover payments if the main tenant fails to do so. This allows Hut 8 to maintain full economic ownership without dilution seen in other transactions.

Benchmark’s valuation breaks down the River Bend lease, optional expansion capacity linked to Fluidstack, Hut 8’s equity interest in American Bitcoin Corp., and the Bitcoin held on the balance sheet.

Palmer said the company chose patience over speed. Power assets were monetized only after return and strategy requirements were met.

The report indicated that the total contract value may climb to about $17.7 billion through three five-year renewal options.

According to Benchmark, the initial 245 megawatt (MW) tranche carries a value close to $7.6 billion. This value is driven by contracted revenue. It is also supported by the scarcity of AI ready capacity backed by an investment grade counterparty.

Last week saw target hikes from multiple brokers. Cantor Fitzgerald raised its Hut 8 target to $72 from $64, and Canaccord lifted its target to $62 from $54.

Hut 8 has a total of 1.2 gigawatt (GW) of energy capacity under management across North America. Its proprietary systems, such as the Reactor energy curtailment platform, help optimize operations and lower costs.

Hut 8 takes the fourth place among Bitcoin miners with a market cap of $5.4 billion. The company’s stock appreciated by 220.95% in the last five years.

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