Rosenblatt keeps Hut 8 at Buy, sees 23% upside despite ERCOT delay
Rosenblatt Securities kept its Buy rating and $124 price target on Hut 8 (NASDAQ: HUT) on Wednesday, implying 22.6% upside from the $101.16 share price cited in its report. The firm maintained its recommendation after Hut 8's second-quarter revenue rose 81% year over year but missed estimates.
Analyst Chris Brendler said the quarter had limited bearing on Hut 8's valuation because its legacy operations are small compared with $26.6 billion of contracted AI data-center revenue. Hut 8 has signed three 15-year leases covering 949 MW of critical IT capacity at Beacon Point in Texas and River Bend in Louisiana.
Hut 8 shares fell 10% after the release, a move Rosenblatt attributed mainly to uncertainty over ERCOT's delayed Batch Zero transmission-planning study. The firm said Hut 8's direct exposure is limited to Beacon Point, a 1 GW campus with 704 MW of contracted critical IT load.
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Texas Gov. Greg Abbott on Monday directed state regulators to audit data centers moving through the interconnection process. ERCOT is reviewing more than 474 GW of interconnection requests, over five times the state's record peak demand, with data centers representing about 90% of the requested capacity.
ERCOT subsequently put Batch Zero on hold, and the study was intended to evaluate new large loads and expansions of 75 MW or more through a centralized process. Rosenblatt said Beacon Point has not yet secured a full exemption, making its treatment as Base Load rather than Studied Load an important issue.
Brendler said Beacon Point's existing AEP Texas interconnection agreement, signed anchor tenant and construction progress support its position. Hut 8 has also procured long-lead equipment and continues to target initial energization in the first quarter of 2027.
Rosenblatt cited the project's financing as another indicator of manageable risk. Hut 8 raised $4.25 billion in June through senior secured, non-recourse notes carrying a 6.129% coupon and maturing in 2042. The notes finance Beacon Point's first six data halls, which together total 352 MW of critical IT capacity, along with the substation and related reserves.
Brendler said those bonds had recently traded higher, indicating that fixed-income investors had not assigned the project greater credit risk. Rosenblatt also said the tenant cannot terminate its lease because of a power delay, limiting the effect on contracted economics if energization slips.
Revenue for the second quarter was $74.9 million, falling short of Rosenblatt's $81.2 million estimate and the $80.9 million consensus cited in the note. Adjusted EBITDA of $10.4 million also fell below Rosenblatt's $22.7 million forecast and the $17.2 million consensus figure.
Gross profit reached $48 million, above Rosenblatt's $47.4 million estimate, as gross margin of 64.1% exceeded its 58.4% forecast. Hut 8 produced 1,170 bitcoin at an ending hash rate of 30 EH/s, while production cost improved to $22,978 per bitcoin from $25,179 in the first quarter.
Rosenblatt lowered its 2026 revenue estimate to $305.7 million from $336.7 million and cut its 2027 estimate to $547.6 million from $609.4 million. Its 2028 model calls for $1.39 billion of revenue and $1.14 billion of adjusted EBITDA as contracted AI capacity enters service.