Morgan Stanley initiated coverage of three publicly traded 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 began covering Cipher Mining (CIFR) and TeraWulf (WULF) with Overweight ratings and set price targets of $38 and $37, respectively. CIFR shares rose 12.4% on Monday to $16.51, while WULF rose 12.8% to $16.12.
Also initiated coverage on Marathon Digital (MARA) with an Underweight rating and a $8 target. MARA shares rose slightly on Monday to $8.28.
Byrd’s central argument is based on viewing 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 steady cash flow than traders focused on bitcoin price swings.
“At a macro level, once a bitcoin company has a built-in data center and enters into a long-term lease with a creditworthy counterparty, the natural habitat of DC investors is not among bitcoin investors but among infrastructure investors,” Byrd wrote, adding that such assets should be valued for their “stable, long-term cash flow.”
To make the point, Byrd compared these facilities to data center real estate investment trusts like Equinix (EQIX) and Digital Realty (DLR), which he described as “the closest comparable companies 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 more than $20 for every dollar of expected annual operating cash flow because those companies offer scale, diversification, and consistent growth.
Byrd does not 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 does not provide.” Still, he sees room for higher valuations than the market currently assigns.
Cipher is at the center of that view. Byrd described the company’s data centers as suitable for what he called a “REIT endgame.” “We use the phrase ‘REIT endgame’ to describe our valuation approach because these contracted CDs should ultimately 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 moving from self-mining bitcoins to leasing space to a large computing or cloud client could resemble a toll road. Cash flows become predictable. The role of bitcoin is fading.
TeraWulf obtained a similar framework. Byrd highlighted the company’s track record in signing data center deals and management’s experience in electrical infrastructure. “TeraWulf has a strong track record of signing agreements with data center clients and the management team has extensive experience building a wide range of energy 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. Its base case assumes the company achieves about half of its planned annual data center growth of 250 megawatts per year over the period 2028-2032. In a more optimistic scenario, it assumes that the success rate will increase to 75%.
The tone changed with Marathon Digital. Byrd argued that the company offers “lesser growth potential driven by bitcoin-to-DC conversions.” He cited Marathon’s hybrid strategy, which combines mining with data center ambitions rather than completely repurposing sites, along with its focus on maximizing exposure to the price of bitcoin, including issuing convertible notes and using the proceeds to purchase bitcoin.
Marathon’s limited history in data center hosting also influenced sentiment. “For MARA, the economics of bitcoin mining are the dominant driver of stock value,” Byrd wrote.
That approach carries risks. “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 the bitcoin mining business has been unattractive.”
The coverage comes as investors debate whether bitcoin miners should evolve into energy and computing owners. Morgan Stanley’s response is selective. Byrd sees value when long-term leases and infrastructure discipline take hold. When mining remains the core business, you see less reason to expect outsized profits.
