Benchmark sees Hut 8 becoming a 'power-first data center REIT,' raises target another 18%

Benchmark Equity Research raised its price target for Hut 8 to $195 from $165 on Wednesday, following the full commercialization of the company's Beacon Point AI campus in Texas.

The price bump is Benchmark's second target hike for Hut 8 (HUT) this month. Analyst Mark Palmer raised the target to $165 from $85 last week after incorporating the first phase of Beacon Point into his valuation.

Hut 8 shares were trading slightly above $111 on Wednesday afternoon, up 2% on the day and nearly 120% year to date, according to The Block's crypto equities page. Benchmark's latest target implies roughly 75% upside from the current price.

Hut 8 announced on Monday that it had signed a second 15-year, $9.8 billion lease with the campus' existing tenant. The agreement doubled the tenant's contracted capacity at Becon Point to 704 MW and brought the 1-gigawatt campus' contract value to $19.6 billion.

Palmer said the deal further proves the validity of Hut 8's strategy of securing power and matching sites with tenants before financing construction. He added that the model now resembles a "power-first data center REIT with an embedded development machine."

He also pointed to how quickly things have developed, noting that Hut 8 took Beacon Point from first lease to full commercialization in just a few months and leased the remaining capacity before the site had even been energized.

The second lease is expected to generate $9.8 billion in operating income, averaging roughly $655 million annually. Combined, the two phases are expected to produce average annual net operating income of $1.31 billion.

Benchmark's valuation also includes Hut's 10,278 bitcoin (BTC), currently worth nearly $680 million, and its 60% stake in American Bitcoin (ABTC).