IREN Stock Forecast: Can the Bitcoin Miner-Turned AI Data Center Rally After Earnings?

IREN stock has come under pressure this year as investors have dumped companies in the neocloud industry amid fears that the AI bubble will burst. It dropped to $24.25 on Tuesday, down by over 68% from its highest point last year. So, will the Bitcoin miner-turned AI data center company rise or fall after the earnings?

IREN Stock Has Dropped as Headwinds Rise

IREN, formerly known as Iris Energy, has slumped sharply in the past few months amid ongoing concerns about its business.

One of the main concerns is that the neocloud industry has become highly competitive, with companies like Lambda, Nscale, and Firmus trying to gain market share. Virtually all large Bitcoin mining companies, like Riot Platforms, MARA Holdings, and Cipher, have moved to the industry.

Most importantly, the industry is facing a financing challenge, pushing companies like IREN, CoreWeave, and Nebius to borrow heavily. IREN’s debt has jumped to over $7.85 billion, much higher than $3.85 billion in January. A recent report estimated that Bitcoin miners that are venturing into the AI data center industry will face a $50 billion funding gap.

Meanwhile, there are questions about the AI data center industry. In a recent report, Gartner estimated that companies in the industry will need to announce impairment charges worth trillions of dollars in the next few years.

These write-downs are possible because of the business model. IREN’s business model is of buying GPUs and then leasing them to hyperscalers and other AI labs. The challenge, however, is that the value of the GPUs will depreciate over time and force the company to upgrade them.

Another challenge is that IREN has not made major announcements this year. It made a $9.3 billion deal last year with Microsoft and a smaller $2.8 billion deal with several AI labs. In contrast, Nscale reached a $45 billion deal with Anthropic.

IREN to Publish Financial Results

The next important catalyst for IREN shares will be its financial results, which will come out on November 5. These results will provide more details about its business and the progress it has made in the past few months.

The most recent results showed that IREN’s revenue slowed to $137.2 million in the June quarter from $144 million in the March quarter. Its AI cloud business made $70 million, higher than the $66 million it made from its Bitcoin mining business.

The decline happened because of the substantial retreat in Bitcoin revenue as prices and output fell.

Analysts expect the trend to continue in the upcoming earnings. The average estimate among analysts is that its revenue dropped by 9.13% in the quarter. For the year, analysts expect the company’s revenue to come in at $2.81 billion, followed by $7.4 billion in the next year.

The challenge is that it will continue to make negative free cash flow as the cost of doing business rises.

IREN Share Price Technical Analysis

The daily chart shows that IREN shares have been in a strong downward trend, coinciding with weakness in other neocloud companies such as CoreWeave and Nebius. It has now slipped below the important support level of $29.17, its lowest level on July 29.

The stock has slumped below all moving averages and the 61.8% Fibonacci Retracement level. Moving below that level confirmed the bearish view.

Therefore, the stock will likely continue to fall as sellers target the next important support level at $20. On the flip side, a move above the crucial resistance level of $29.17 will invalidate the bearish outlook.

This article provides market information, not investment advice. Stock investments involve volatility and potential losses.