Morgan Stanley initiated coverage of three listed bitcoins mining companies on Monday backing two names linked to data center leasing while taking a more cautious stance on a miner focused on bitcoin exposure.
Analyst Stephen Byrd and his team initiated coverage of Cipher Mining (CIFR) and TeraWulf (WULF) with overweight ratings and set price targets of $38 and $37, respectively. Shares of CIFR are higher by 12.4% on Monday at $16.51, while WULF is ahead 12.8% at $16.12.
He also initiated coverage on Marathon Digital (MARA) with an Underweight rating and an $8 target. Shares of MARA are marginally higher on Monday at $8.28.
Byrd’s core argument rests on seeing certain bitcoin mining sites less as crypto bets and more as infrastructure assets. Once a mining company has built a data center and signed a long-term lease with a strong counterparty, he wrote, the asset is better suited to investors who value stable cash flow than to traders who focus on bitcoin price fluctuations.
“On a macro level, once a bitcoin company has an on-board data center and has entered into a long-term lease with a creditworthy counterparty, DC’s natural investor habitat is not among bitcoin investors, but among infrastructure investors,” Byrd wrote, adding that such assets should be valued for “long-term, stable cash flow.”
To make the point concrete, Byrd compared these facilities to data center real estate investment trusts like Equinix ( EQIX ) and Digital Realty ( DLR ), which he described as “the closest comparables to consider when valuing DC assets developed by bitcoin companies.” Their shares trade at more than 20 times forward EBITDA, meaning investors are willing to pay over $20 for every $1 of expected annual operating cash flow because these companies offer scale, diversification and steady growth.
Byrd doesn’t expect data centers developed by bitcoin companies to trade at similar levels, “primarily because these data center REITs have growth potential that a single DC asset doesn’t provide.” Still, he sees room for higher valuations than the market is currently assigning.
Cipher sits in the center of that view. Byrd described the company’s data centers as suitable for what he called a “REIT end game.” “We use the term ‘REIT endgame’ to describe our valuation approach because these contracted DCs were ultimately to be owned by REIT-like investors who appropriately value long-term, low-risk contracted cash flows,” he wrote.
In a simple scenario, a Cipher site switching from self-mining bitcoin to renting space to a large cloud or computing customer could look like a payment gateway. Cash flows become predictable. Bitcoin’s role is fading.
TeraWulf achieved a similar framework. Byrd pointed to the company’s history of signing data center deals and to management’s background in power infrastructure. “TeraWulf has a strong track record of signing deals with data center customers and the management team has extensive experience building a wide range of power infrastructure assets,” he wrote.
He expects the firm to convert sites without bitcoin-to-data center contracts at a present value of about $8 per watts. His base case assumes the company succeeds in about half of its planned annual data center growth of 250 megawatts per year over 2028-2032. In a more optimistic scenario, he assumes that the success rate increases to 75%.
The tone changed with Marathon Digital. Byrd argued that the company offers “lower potential upside driven by bitcoin-to-DC conversions.” He cited Marathon’s hybrid strategy, which combines mining with data center ambitions rather than repurposing sites, along with its focus on maximizing exposure to bitcoin’s price, including issuing convertible notes and using the proceeds to buy bitcoin.
Marathon’s limited history of hosting data centers also weighed on the outlook. “For MARA, bitcoin mining economics are the dominant driver of the stock’s value,” Byrd wrote.
That focus entails risk. “Fundamentally, we see significant risks to the profitability of bitcoin mining, both in the short and long term,” Byrd added, noting that “the historical ROIC of bitcoin mining has been unattractive.”
The coverage lands as investors debate whether bitcoin miners should evolve into power and computer lessors. Morgan Stanley’s response is selective. Where long-term leases and infrastructure discipline make an impact, Byrd sees value. With mining still the core business, he sees fewer reasons to expect big gains.
