Morgan Stanley initiated coverage of three publicly traded bitcoins mining companies on Monday, backing two names tied to data center leasing while taking a more cautious stance toward 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 are up 12.4% Monday at $16.51, while WULF is ahead 12.8% at $16.12.
He also initiated coverage of Marathon Digital (MARA) with an underweight rating and a target of $8. MARA shares are slightly higher Monday at $8.28.
Byrd’s main argument hinges on viewing some bitcoin mining sites less as crypto bets and more as infrastructure assets. Once a mining company builds a data center and signs a long-term lease with a strong counterparty, he writes, the asset is better suited to investors who value a stable cash flow than to traders focused on bitcoin’s price fluctuations.
“At the macro level, once a Bitcoin company has an integrated data center and has entered into a long-term lease with a creditworthy counterparty, the natural habitat for DC investors is not among Bitcoin investors but among infrastructure investors,” Byrd wrote, adding that these assets should be valued for “long-term stable cash flow.”
To make this point concrete, Byrd compared these facilities to data center real estate investment trusts such as Equinix (EQIX) and Digital Realty (DLR), which he described as “the closest comparable companies to consider when evaluating 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 these companies offer scale, diversification and steady growth.
Byrd does not expect data centers developed by Bitcoin companies to trade at similar levels, “primarily because these data center REITs have growth potential that a single DC asset does not provide.” He nevertheless believes that it is possible to obtain higher valuations than those currently assigned by the market.
Cipher is in the center of this view. Byrd described the company’s data centers as being suited to what he called an “endgame REIT.” “We use the term ‘REIT endgame’ to describe our valuation approach because, ultimately, these contracted CDs should be owned by REIT-style investors who appropriately value long-term, low-risk contracted cash flows,” he wrote.
In a simple scenario, a Cipher site moving from self-mining Bitcoin to renting space to a large cloud or IT client might resemble a toll road. Cash flows become predictable. The role of Bitcoin is fading.
TeraWulf got a similar framework. Byrd highlighted the company’s history of signing data center deals and management’s experience with power infrastructure. “TeraWulf has a strong track record of signing deals with data center customers, and the management team has extensive experience building a wide range of power infrastructure assets,” he wrote.
He expects the company to convert sites without a Bitcoin contract into a data center at a current value of around $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, he assumes the success rate rises to 75%.
The tone has changed with Marathon Digital. Byrd argued that the company offers “lower upside potential from Bitcoin-DC conversions.” He cited Marathon’s hybrid strategy, which combines mining with data center ambitions rather than completely repurposing sites, as well as a focus on maximizing exposure to the Bitcoin price, including issuing convertible notes and using the proceeds to purchase Bitcoin.
Marathon’s limited experience with data center hosting also weighed on this opinion. “For MARA, the Bitcoin mining economy is the dominant driver of the stock’s value,” Byrd wrote.
This concentration 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 return on capital from Bitcoin mining has been unattractive.”
The media coverage comes as investors debate whether Bitcoin miners should become electricity and computing owners. Morgan Stanley’s response is selective. Where long-term leases and infrastructure discipline are required, Byrd sees value. Where mining remains the main activity, he sees less reason to hope for outsized gains.
