CleanSpark Stock Down 30% in a Week: Should You Stay Invested or Exit?

CleanSpark, Inc. CLSK stock has recently seen a sharp decline, tumbling 29.6% in the last week. This significant fall came after the company announced an upsized offering of $1.15 billion in convertible senior notes on Nov. 10, which carry a coupon rate of 0.00%.The market reacted with short-term selling pressure, driven by dilution concerns and caution. Convertible senior notes can pressure a stock because they have the potential to be converted into new shares, which increases the total number of outstanding shares and dilutes the value of existing holdings.With the recent slump in CLSK’s share price, investors might be wondering whether to stay invested in the stock or exit the investment.CleanSpark’s Business Pivot and Growth PotentialCleanSpark is actively transforming its business from a pure-play Bitcoin miner into a broader digital infrastructure and artificial intelligence (AI) or high-performance computing (HPC) data center provider. The company is leveraging its existing assets, including power infrastructure and land portfolio, to build out sophisticated data centers for the rapidly accelerating AI and HPC industries.This diversification is a smart move that positions CleanSpark to tap into secular growth drivers that extend beyond the cyclical nature of Bitcoin prices. Having a dual exposure to both crypto mining and AI infrastructure gives CleanSpark more stable growth prospects over the long run. This strategic pivot helps de-risk the company's future revenue streams.CleanSpark’s Capital DeploymentCLSK’s plan for the $1.15 billion raised through the convertible notes is a strong signal of confidence in the company’s future and a commitment to shareholder value. A significant portion of the funds, approximately $460 million, has already been used to repurchase common stock from investors. This action directly offsets some of the potential dilution fears associated with the convertible notes and signals that management believes the stock is undervalued at its current price.Repurchasing shares effectively reduces the outstanding share count, boosting earnings per share for remaining shareholders. Additionally, the zero-coupon structure of the notes further benefits the company by avoiding regular cash interest payments and preserving operating cash flow.The terms of the convertible notes themselves also offer a measure of protection for current shareholders. The initial conversion price for the notes is set at a significant premium. The conversion rate is currently fixed at 52.1832 shares per $1,000 note, which equates to $19.16 per share. This translates to about 27.5% higher than the stock’s closing price on the day the offering was announced.At the last closing price of $10.61, the conversion rate is now approximately 45% higher. This means the stock price must appreciate considerably before the convertible notes pose a genuine risk of being converted into new shares, providing a substantial buffer against immediate dilution.The remaining proceeds are reserved for expanding its land and power portfolio, developing new data center infrastructure and repaying existing debt, including Bitcoin-backed credit lines. These are all growth-focused expenditures, not expenses to cover operating losses. This investment in physical infrastructure is necessary to execute the pivot into the AI and HPC data center market, which we believe could unlock substantial long-term value.CLSK’s Resilient Financial PerformanceDespite the ongoing macroeconomic headwinds, CleanSpark’s financial performance remains rock solid. In the third quarter of fiscal 2025, CLSK reported earnings of 78 cents per share against the year-ago quarter’s loss of $1.03 per share and the Zacks Consensus Estimate of break-even earnings.Revenues of $198.6 million climbed 90.8% year over year and beat the consensus mark by 0.11%.  The growth was driven by increased Bitcoin production and higher Bitcoin prices.In the third quarter, the company produced 2,012 Bitcoin, a 28% increase year over year. Average revenue per Bitcoin was $99,000, which increased 50% year over year. Cost per Bitcoin in the third quarter was $44,806, which was far below the average spot price of approximately $98,500 during the same period.Cleanspark, Inc. Price, Consensus and EPS Surprise Cleanspark, Inc. price-consensus-eps-surprise-chart | Cleanspark, Inc. QuoteEstimates for the upcoming quarterly results also depict another robust financial performance. The Zacks Consensus Estimate for fourth-quarter revenues indicates year-over-year growth of 167.4%. The consensus mark for earnings is pegged at 5 cents per share, implying a solid improvement from the year-ago quarter’s loss of 27 cents.CleanSpark Trades at a Lower Valuation Than PeersOn the valuation front, CleanSpark looks reasonably priced relative to its direct peers. The stock currently trades at a forward 12-month price-to-sales (P/S) ratio of 3.11, modestly above the Zacks Finance – Miscellaneous Services industry average of 3.06.CleanSpark Forward 12-Month P/S RatioImage Source: Zacks Investment ResearchNonetheless, CleanSpark trades at a lower P/S multiple compared with other listed Bitcoin miners, including TeraWulf Inc. WULF, Riot Platforms, Inc. RIOT and MARA Holdings, Inc. MARA. At present, TeraWulf, Riot Platforms and MARA Holdings have P/S multiples of 13.4, 7.03 and 4.15, respectively.Despite the recent dip, shares of CleanSpark have risen 15.1% year to date, outperforming the industry’s decline of 6.4%. Compared with peers, the company has outperformed MARA Holdings, while underperforming TeraWulf and Riot Platforms. While MARA Holdings has declined 31.3% year to date, shares of TeraWulf and Riot Platforms have soared 95.3% and 36%, respectively.CleanSpark YTD Price Return PerformanceImage Source: Zacks Investment ResearchConclusion: Hold CLSK Stock for NowThe recent sell-off in CleanSpark’s share price is mainly a reaction to financing structure and dilution fears, not a breakdown in fundamentals. The company is using the capital to repurchase shares, strengthen its balance sheet and fund its pivot into AI and HPC data centers, all moves that can support long-term value.At the same time, CleanSpark continues to deliver solid financial results and trade at a discount to several peers. The conversion terms on the notes also provide a buffer against immediate dilution.Given this mix of short-term volatility and long-term opportunity, we believe long-term investors should stay invested in CLSK stock for now.CleanSpark carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Marathon Digital Holdings, Inc. (MARA): Free Stock Analysis Report Riot Platforms, Inc. (RIOT): Free Stock Analysis Report Cleanspark, Inc. (CLSK): Free Stock Analysis Report TeraWulf Inc. (WULF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks