Is Iris Energy (IREN) IPO Stock a Good Buy? Outlook Is Promising

Sydney-based Iris Energy has filed for an IPO and will list on Nasdaq under the ticker symbol “IREN.” What's the stock's forecast? Should you buy Iris Energy IPO stock?

Founded in 2018, Iris Energy is a Bitcoin mining firm. The company builds, owns, and runs data centers and electrical infrastructure for the mining of cryptocurrencies by using renewable energy. The IPO comes at a time when digital currencies are becoming popular as investment assets and following a rise in their use for making payments.

Iris Energy hasn’t specified its IPO date yet, but it's expected to list during the week of Nov. 15. The company has kept the IPO price between $25 and $27, and the final pricing will be announced next week.

Iris Energy plans to offer 8.3 million shares as part of the IPO, and the underwriters have an option to purchase another 1.24 million shares. The company will raise over $258 million in gross from the IPO at the upper range if the underwriting option is fully exercised. Iris Energy intends to use the proceeds for growth initiatives and general corporate purposes.

Iris Energy is seeking a market valuation of $1.4 billion. The company generated revenues of $17 million in the 12 months ended Sept. 30. Based on its market cap, Iris Energy's trailing price-to-sales multiple is 82.4x. Considering that peers Marathon Digital and Riot Blockchain are trading at NTM EV-to-sales multiples of 13.7x and 9.5x, respectively, Iris Energy stock looks overvalued.

Bitcoin trends will greatly influence Iris Energy stock in the future. Bitcoin hit a record high of about $68,000 on Nov. 9. The interest in Bitcoin as an investment has skyrocketed since ProShares introduced its Bitcoin Strategy ETF (BITO). Iris Energy estimates that the market opportunity for Bitcoin mining will be around $16 billion in 2021.

The data center in British Columbia, Canada has around 30 MW (megawatt) of capacity and an operating hash rate capacity of about 0.7 EH/s as of Oct. 1. The company is targeting about 1 GW of aggregate power capacity. Iris Energy has been mining Bitcoin since 2019. However, it has sold all of the mined coins and didn't have any Bitcoin on its balance sheet as of Sept. 30.

For the three months ended Sept. 30, Iris Energy reported a net loss of $490 million on revenue of $10.4 million. In fiscal 2021 (12 months ended June 30, 2021), the company reported a net loss of $58 million on revenue of $7.5 million.

The outlook for Iris Energy stock seems promising. Bitcoin's price will likely rise more as it gains popularity as a form of payment, investment, and store of value. More Bitcoin ETFs from providers like Valkyrie, VanEcK, and Invesco are anticipated to be launched in the future. While Iris Energy's valuation multiple might appear high in absolute terms, it’s a high-growth business with significant revenue growth expected in the coming years.

When Iris Energy shares start trading publicly, you will be able to purchase them through any brokerage, including Robinhood.