Compass Point on Terawulf Inc. (WULF) Amid 22.5pct Run: 'we view the new site as evidence of TeraWulf's extended toolbox for adding to its pipeline'
Compass Point analyst Michael Donovan reiterated a Neutral rating and $17.00 price target on Terawulf Inc. (NASDAQ: WULF).
The analyst comments "Majority-owned, pass-through JV that locks long-duration demand. Discussed in our previous note, we expected TeraWulf to expand outside of New York, yet we are still surprised by the speed. This morning, TeraWulf announced a 25-year modified-gross JV with Fluidstack with no dilution for 168MW of critical IT load at Abernathy, TX, backed by a $1.3B Google lease backstop and targeting RFS in 2H26. The deal speaks to the confidence Fluidstack has in TeraWulf and continues to use the 168MW plan that TeraWulf designed at Lake Mariner, which interestingly is also the one Fluidstack is deploying at the Cipher (CIFR) site. The JV retains rights to add phases at Abernathy, and TeraWulf also holds exclusivity to partner on the next 168MW Fluidstack-led project outside of Abernathy on similar terms. Sited in SPP (Xcel Energy/Southwestern Public Service) rather than ERCOT, Abernathy should benefit from FERC-jurisdictional rules, SPP’s new provisional load pathway and a new 90-day fast-track program for high-impact large loads. Power is 100% pass-through to Fluidstack under the modified-gross lease which includes options to shorten the 25-year term to 20 or 15 years. On pricing, the JV implies roughly $2.26M/MW/yr, up from $1.86M/MW/yr at Lake Mariner; the filed deck shows $380M average revenue and $260M site NOI at 70% margin, implying $133M/yr to WULF at 51%. NOI margins are lower here given that TeraWulf is leasing the site from a third party; we view the new site as evidence of TeraWulf's extended toolbox for adding to its pipeline, using a mix of leased and owned sites where it makes the most strategic sense. While many peers are valued based on disclosed pipeline, TeraWulf typically announces only when it is in late-stage negotiations with an anchor tenant; accordingly, we expect additional site announcements over the next one or two quarters. With contracted HPC now exceeding 510MW, we remain bullish on TeraWulf’s ability to execute and maintain our Buy rating and $17 price target. No adjustment to estimates. Preliminary 3Q25 financial results guide to 3Q25 revenues between $48M and $52M. With official 3Q25 earnings expected to come out in the near term, we refrain from adjusting estimates at this juncture and wait for a more thorough breakdown of earnings. Reiterate Buy and $17 price target. With WULF up over 20% on the day as this goes to publishing, we maintain our $17 price target and plan to reassess as more details on the deal are disseminated. Our $17 PT represents a 23x EV/revenue multiple on our $318.3M FY2026 estimate and a more conservative 12x EV/revenue multiple on our base $598M FY2027 estimate."
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Shares of Terawulf Inc. closed at $13.64 yesterday.