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About TeraWulf

I’ll be the first to admit that the amount of times I’ve really sat down and written extensively on Bitcoin have been far and few.

I mean, I only wrote about a cryptocurrency brokerage that goes by Coinbase and other than that, mum has been the word when it comes to my sitting down and really discussing the cryptocurrency and its counterparts through this medium.

I got word of a few viewers writing in, requesting that I write about it, so I compromised a bit and elected to write a stock analysis article on a publicly traded company that mines the cryptocurrency and sells it to the masses, for hopefully more than it mined it for in the first place.

Enter TeraWulf.

Headquartered in Easton, Maryland, TeraWulf is not only merely a miner of Bitcoin, but it has a sustainability twist, as a matter of fact, the company priding itself on utilizing zero-carbon energy sources in the process of mining, which, as many of us have heard time and time again, has historically required a lot of resources and energy. It’s been reported that right about now they use a whopping 95% zero-carbon energy sources, such as solar, water as well as nuclear.

Regardless of how one might feel about climate-related matters, I think we can and frankly should all agree that this is very impressive.

At any rate, the basic explanation of the way in which this company mines the currency is through a very loaded, high-tech stack of computers and other bits, pieces and hardware accessories, and with all of this computing power necessitates sources of energy to keep everything online and running at the rate it should, which is evidently a very demanding and high one.

At the moment, the company has two primary mining facilities, one called the Lake Mariner Facility, which is housed in New York and its facility in Pennsylvania, by the name of the Nautilus Cryptomine Facility. TeraWulf makes money the same way that a traditional mining company does; sourcing and producing a commodity or product of sorts and subsequently selling it to third parties to use for more than it cost for them to source and produce said commodity or product.

However, instead of investing in a bunch of heavy machinery and cracking rocks open as deep as it can get into the core of the earth, TeraWulf mines Bitcoin through solving an array of complex and lengthy mathematical problems and models thereof, and once those codes are eventually cracked, the company has gained access to the Bitcoin within as a sort of reward, with this newly gained block of Bitcoin added to the blockchain and the associated ledger is updated as well.

Honestly, that is the simplest way I can explain it without boring you.

Hopefully the operation was a success.

At any rate, in order to crack these codes efficiently, Bitcoin miners need a lot of high-energy, extensive computing power, and with that, TeraWulf has seemingly found a few different ways in which it can perform this function in a more energy-efficient manner.

The last thing I will mention prior to jumping into this company’s core numbers is that it also makes some money by simply holding onto some of the Bitcoin it successfully mines, which, obviously isn’t to be considered the most sure-fire source of revenue generation, and while it isn’t completely clear per the research I’ve done, it doesn’t seem as though this is a particularly large part of the company’s business model (which is great, in my opinion), but a more secondary and perhaps even speculative arm of the business that makes TeraWulf just that much more, I’ll say, interesting.

In all honesty, I see this as more of a reward than a risk (I’m no Bitcoin zealot but I certainly see the merits and future potential), but please do be careful and ultra-considerate if you happen to end up looking into this company’s stock more seriously, as this company is directly impacted by the prevailing price of Bitcoin, which is well known for being volatile.

Numbers, please.

TeraWulf’s stock financials

Trading at a stock price of $8.25 with a market capitalization (which can also be thought of as the value of all of the company’s outstanding shares out in the market today) of $3.16 billion, the company does not issue an annual dividend to its shareholders nor does it have a displayed price-to-earnings (P/E) ratio, all of which initially makes sense being that TeraWulf is a very, very (did I mention very?) young company, as it was formally founded in 2021, and given the short amount of time it has been alive and independent in the public markets, also incorporating that the company is more than likely investing a heavy amount of its capital and other resources in its technologies at a very rapid rate, it would make absolutely zero sense for this company to pay its shareholder a regular dividend (and I don’t even believe this company will issue a regular dividend anytime soon, candidly) and regarding its stock not having a readily available price-to-earnings ratio, this company is likely not net profitable (given what I just said regarding growth, among other general factors), hence it not having any positive earnings to show to the world just yet.

All of this was to be expected, I’ll have you know.

In trying to unveil more about TeraWulf through its finances, the company’s executive team is in charge of a balance sheet which consists of $378 million in terms of total assets and $156 million in terms of total liabilities, which is a great base off of which it can operate. Primarily, being in a very investment intensive nook of the crypto economy, having a markedly higher amount of net assets than net liabilities is a major positive, and tells me that this company can actually afford to grow and invest in current facilities as well as new ones down the line, not to mention perhaps a more pressing investment being its hardware and back-end systems that allow it to efficiently mine Bitcoin.

Onto the condition of the company’s income statement, TeraWulf’s more recent annual revenues spanning between and during 2019 and 2023 have seen their fair share of fluctuation, ranging between a lower bound of $0 (2021) and a most recently reported high of $69 million in 2023. In providing a little more necessary context, revenues in all other years during this time period generally were in the mid-to-high teens, the company reporting revenues in the amount of $17.62 million in 2019, $13.43 million in 2020 and slightly above $15 million in 2022. All of this begs the questions as to why the company’s revenues were zilch in 2021 as well as what was the catalyst that launched its revenues between 2022 and 2023. 

Regarding reporting no revenues in 2021 and minimal revenues in years prior, this has to do with the company as we know it today, TeraWulf, but more so the much lesser-known imaging technology company that it owned by the name of IKONICS Corporation. The shorter version of the story is that TeraWulf initially acquired IKONICS through a reverse merger in December 2021, a non-traditional avenue that TeraWulf pursued in order to become publicly traded, sold IKONICS in August 2022 and formally began its bitcoin mining operations in March 2022, all leading into the much more focused sustainability-oriented cryptocurrency miner that we know today as TeraWulf, and TeraWulf alone.

Hence the sizable jump in revenues from 2022 to 2023. 

Now that we have that out of the way, before I proceed I’d like to state the obvious and point out that moving forward, there is no getting around the fact that TeraWulf’s revenues are going to be directly influenced by the price of Bitcoin and the health and sentiment surrounding the mainstream cryptocurrency landscape, and without wasting too much time, I’ll just say that it would be a good idea for those looking further into this company’s stock (NASDAQ: WULF) as a potential investment prospect, you must be fine with assuming such a risk, as we all know that crypto can have its fair share of volatile periods, and this is coming from someone who actually isn’t adamantly anti-crypto.

Just a word to the wise.

Onto the company’s cash flow statement, TeraWulf’s total cash from operations have turned a recent corner, rising just ever so slightly out of negative territory in 2023 to $4.26 million, for reference standing at -$34 million in 2022, -$24 million in 2021, and, you guessed it, also negative territory in 2020 and 2019.

This is certainly a positive, especially given just how much deeper in the red its cash from operations were in years immediately preceding this most recently reported one, but it also highly conducive towards management’s goal of being debt-free by 2025, telling me that TeraWulf’s executives aren’t just blowing smoke, but actually are carving out the emergence of positive total cash through its operations to back up this goal.

This, along with the current shape of its balance sheet lends itself the opportunity to invest in other related, growth-centric areas in the crypto and AI sectors, as the company’s management has not only discussed plans to continue building out other mining sites, but has also already discussed the further exploration of developing sustainable data centers, focusing on those that reduce emissions resulting from energy-intensive cloud computing and generative AI operations.

Clearly, this is setting itself up to be a very wide and deep market and opportunity for TeraWulf, and most importantly, as of right now, it seems as though this company has the financial wherewithal and expertise to get these jobs done for the time being.

TeraWulf’s stock fundamentals

Nobody should be surprised by the fact that TeraWulf’s net profit margin is currently negative, sitting well below breakeven at -50.09% (as shown on Charles Schwab’s platform), as with a more infrastructure-focused growth company typically comes higher costs, primarily rooted in operating costs as well as general and administrative (G&A) expenses, along with other inherent growth and scaling costs.

It just isn’t all that reasonable to expect a company at the crosshairs of two major growth sectors (cryptocurrencies and AI) to be highly (net) profitable right now, from my perspective, plus there are some direct positives that allude to the company’s net profit margin improving moving forward, particularly with the company aggressively hewing down its debt, a rather recent example being management’s early payment of a $77.5 million term loan in July 2024, virtually eliminating all of the company’s outstanding debt.

Oh yeah, and TeraWulf just so happens to also have a comparably low cost of mining, and with industry-leading economics leads to better support for when the price of Bitcoin trends southbound.

Still, as a prospective shareholder I am in favor of this capital-intensive company sacrificing profitability in the pursuit of growth, being that as the company matures over time, it’ll have likely developed that much better of an operational base and relative moat, and at that point it can ooze some cash flow and sustain a (net) profit.

Should you buy TeraWulf stock?

All things considered, I am a fan of this company, and believe that Bitcoin is here to stay, whether you like it or not.

When also throwing into the mix the company’s lean towards sustainability and just how favorably national and global government agencies are likely to glean towards TeraWulf and its initiatives (perhaps in the form of tax breaks and other meaningful incentives), plus its in-shape balance sheet, its distinct revenue growth in most recent years, its total cash from operations turning a corner and the company’s impressive balancing act between impressive internal growth while also having little-to-no debt on its books, I think this company is just getting started.

Contrasting these positives with some risk factors such as being subjected to the price of Bitcoin (but you already knew that), undoubtedly also having to trudge through the current and future cryptocurrency regulatory landscapes, I still see more promising pros than prohibitive cons, thus, the “buy” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.

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