As the great Russian sage once said, “All happy families are alike; each unhappy family is unhappy in its own way.” But when it comes to Galaxy Digital’s recent 15-year AI hosting agreement with CoreWeave, it’s more like, “All happy investors are alike; each investor who bought Galaxy Digital’s stock is about to become very, very happy!” 💸
According to H.C. Wainwright & Co. analyst Mike Colonnese, this deal marks a potentially transformative move for the company. During Galaxy Digital’s Q4 2024 earnings call, the agreement was announced, and it’s a doozy. As part of the deal, Galaxy will repurpose 200 MW of its Helios mining facility in West Texas to host 133 MW of critical IT load for CoreWeave’s GPUs. That’s like taking a rusty old car and turning it into a sleek, high-performance sports car overnight! 🚗
The contract is expected to generate a whopping $4.5 billion in revenue over its term, or around $300 million annually. That’s a 70% boost to Galaxy’s total 2024 revenues, and it’s “very favorable relative to other high-performance computing deals,” according to Colonnese. The estimated $2.26 million per MW in annual revenue at roughly 90% EBITDA margins is like finding a needle in a haystack, but a very, very long needle! 🧵
Significant growth potential at Helios
While the upfront retrofit costs are expected to range between $1.46 billion and $1.73 billion, Colonnese noted that most of this will be financed through project debt. CoreWeave will cover ongoing electricity and operating expenses, keeping Galaxy’s recurring costs low. The analyst also pointed out that Galaxy has 600 MW of additional capacity at Helios to support future expansion. He wrote:
“Applying current data center valuations to contracted capacity for Galaxy’s new data center business, we estimate the segment could eventually be worth over $3.5B, a valuation that is far from being priced into shares.”
The analyst is maintaining a Buy rating on Galaxy’s stock with a price target lowered from C$35 to C$30. The price target reflects an approximate 40% discount to traditional finance broker dealers given “Galaxy’s smaller scale and narrow focus on digital assets,” and a 40% discount to Coinbase.
Q4 recap: exceeded expectations
Galaxy also delivered a Q4 beat. Revenue of $698.1 million was up 388% from the prior quarter and beat the analyst’s model of $248.2 million and the consensus estimate of $202.7 million.
The company reported a $560.6 million realized gain on digital assets in the quarter and a $84.9 million realized loss on investments. Total operating expenditure of $440.3 million was up 137% quarter-over-quarter, driven in part by a $166.3 million one-time charge related to a settlement with the New York Attorney General to resolve claims related to its involvement with LUNA.
Net income/EPS of $174.3 million/52 cents also exceeded the analyst’s estimate of $94.2 million/28 cents.
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2025-03-31 17:00