Morgan Stanley begins reporting on 3 listed Bitcoin stocks BTC$70,151.59 Mining companies on Monday backed two companies involved in data center leases, while taking a more cautious stance on miners focused on Bitcoin exposure.
Analyst Stephen Byrd and his team initiated coverage of Cipher Mining (CIFR) and Terrawolf (WULF) with an overweight rating and price targets of $38 and $37, respectively. CIFR stock rose 12.4% to $16.51 on Monday, while WULF rose 12.8% to $16.12.
He also initiated coverage of Marathon Digital (MARA) with an Underweight rating and $8 target. MARA stock was up slightly on Monday at $8.28.
Bird’s central argument is based on viewing certain Bitcoin mining sites as infrastructure assets rather than crypto bets. Once a mining company builds a data center and signs a long-term lease with a strong trading partner, the asset is better suited to investors looking for stable cash flow than traders focused on Bitcoin price fluctuations, he wrote.
“At a macro level, once a Bitcoin company builds in a data center and signs a long-term lease with a creditworthy counterparty, the natural investor habitat in DC is not Bitcoin investors but infrastructure investors,” Bird wrote, adding that such assets should be valued as “long-term, stable cash flows.”
To illustrate this point, Bird compared these facilities to data center real estate investment trusts such as Equinix (EQIX) and Digital Realty (DLR), calling them “the closest comparable companies to consider when evaluating DC assets developed by Bitcoin companies.” These companies’ stocks trade at more than 20 times forward EBITDA, and investors are willing to pay more than $20 for every dollar of expected annual operating cash flow because these companies offer scale, diversification, and consistent growth.
Bird doesn’t expect data centers developed by Bitcoin companies to trade at similar levels. “Mainly because these data center REITs have growth potential that a single DC asset cannot provide.” Still, he sees room for a higher valuation than what the market is currently assigning.
Cypher sits in the center of his field of vision. Bird said the company’s data centers are well-suited for what he calls the “end-of-the-line REIT.” “We use the term ‘REIT endgame’ to describe our valuation approach because ultimately these contract DCs should be owned by REIT-like investors who properly value the long-term, low-risk contract cash flows,” he said.
In a simple scenario, a Cipher site that moves from self-mining Bitcoin to leasing space to large-scale cloud or computing customers could resemble a toll road. Cash flow becomes predictable. The role of Bitcoin will diminish.
TeraWulf also acquired a similar framework. Bird pointed to the company’s history of winning data center contracts and its management team’s background in power infrastructure. “TeraWulf has a strong track record of contracting with data center customers, and its management team has extensive experience building a wide range of power infrastructure assets,” he wrote.
He expects the company to convert sites without Bitcoin contracts into data centers at a current value of about $8 per watt. His base case assumes the company succeeds at about half of its 250 megawatts of annual data center growth from 2028 to 2032. A more optimistic scenario assumes that the success rate increases to 75%.
The tone has changed for Marathon Digital. Bird argued that the company has “low upside potential driven by Bitcoin to DC conversion.” Rather than completely repurposing the site, he cited Marathon’s hybrid strategy, which combines mining and data center ambitions, and its focus on maximizing its exposure to the bitcoin price, including issuing convertible bonds and using the proceeds to buy bitcoin.
Marathon’s limited history with data center hosting also weighed on this view. “For MARA, the economics of Bitcoin mining are the primary driver of the stock price,” Bird wrote.
That concentration comes with risks. “Fundamentally, we believe there are significant risks to the profitability of Bitcoin mining, both in the short and long term,” Bird added, noting that “the historical ROIC of Bitcoin mining operations has not been attractive.”
The report comes as investors debate whether Bitcoin miners should evolve into landlords of power and computing. Morgan Stanley’s answer is selective. Bird sees value in places where long-term leases and infrastructure discipline are in place. If mining remains the core business, he believes there will be less reason to expect significant profits.
