Hut 8 Corp. (NASDAQ:HUT) stock plunged 23% on Wednesday and continued to decline on Thursday following its third-quarter results, as investors assessed how Texas’ new governor could affect the company’s Beacon Point data center campus.
Analysts at Cantor Fitzgerald, Rosenblatt and Needham see the risk differently from the market. Cantor and Rosenblatt call the selloff an overreaction, while Needham says Texas risk has risen but keeps its Buy rating.
Permit Timing in Focus
Cantor said, based on its conversation with management, that Beacon Point Phase 1 has no outstanding permits. Phase 2, which has not started construction, needs only a notice of intent, a filing for site work.
Cantor said Gov. Greg Abbott, who leaves office in January, froze the permit process until an audit ends on Dec. 10. The firm noted that Gov.-elect Gina Hinojosa cannot extend that freeze because she does not take office until January. Cantor expects permits to resume between mid-December and mid-January and said reversing them later would require a two-thirds vote of the state legislature.
Rosenblatt said Hinojosa has called for stronger rules rather than a ban and that legislation would need bipartisan support. “We think the market is pricing a doomsday scenario that the policy path doesn’t support,” the firm said. It added that the tenant cannot end the lease because of a power delay, so any delay would affect when rent starts rather than the contract itself.
Needham Differs
Needham said the call focused on the election and on whether the Dec. 10 audit results and the Dec. 17 Public Utility Commission of Texas (PUCT) sign-off could become obstacles. The firm said it is “modestly less confident” that the December approvals will proceed as scheduled than it would have been had Abbott been reelected. It also sees a higher risk of delays across the Texas data center market.
Financing and Pipeline
Phase 2 has no financing yet. Rosenblatt estimates the debt would price near 7.5%, compared with 6.129% for Phase 1. Cantor said Hut 8 reiterated that it does not need equity funding and that construction remains on schedule. The company said less than 5% of its pipeline sits in ERCOT.
Needham noted that Hut 8 has cleared 184 acres at River Bend, Louisiana, where Fluidstack holds a right of first offer on up to 1 gigawatt of additional capacity.
All three firms kept their bullish ratings but lowered their price targets. Cantor cut its target to $127 from $151, Needham to $101 from $138, and Rosenblatt to $100 from $125.
HUT Stock Price Activity: Hut 8 shares are trading lower by 6.43% at $45.80 at the time of publication on Thursday, according to Benzinga Pro data.
Photo: Jirapong Manustrong/Shutterstock
