Bernstein Advises to Buy the Dip in Bitcoin Mining Stocks Amidst Potential Price Inflection
Bitcoin mining stocks have faced a period of underperformance recently, but according to broker Bernstein's research report released on Monday, any short-term weakness could present an opportunity for investors. The mining stocks have encountered two challenges following the approval of spot bitcoin exchange-traded funds (ETFs): diminished investor interest in using them as a proxy and a softer BTC price, contributing to further underperformance, as highlighted in the report.
The Valkyrie Bitcoin Miners ETF (WGMI), which invests in publicly traded bitcoin mining stocks, has experienced a nearly 38% decline this year, in contrast to the relatively stable bitcoin price and broader equity markets.
However, this underperformance could offer investors a chance to enter the mining stocks market. Analyst Mahika Sapra wrote, "Similar to bitcoin, the next couple of months present a buying opportunity in mining stocks," as these stocks are expected to exhibit a "higher beta trade" during the next bitcoin price inflection. The report suggests the possibility of further temporary weakness in bitcoin, with a potential short-term bottom in the $38,000-$42,000 range. Despite this, investors are advised to adopt a "structurally long" position ahead of the next halving event, anticipated in April.
In a separate note on Wednesday, Bernstein reiterated its positive outlook on the miners. The broker suggests gaining exposure to bitcoin through miners that offer higher gains than bitcoin itself, driven by EBITDA expansion and market multiple growth during the bull cycle. Bernstein favors outperform-rated stocks Riot Platforms (RIOT) and CleanSpark (CLSK) as preferred options for investors.