Morgan Stanley Cuts Cipher Digital Target to $27.50, Keeps Overweight Rating

Morgan Stanley lowered Cipher Digital’s target

Morgan Stanley maintained an Overweight rating on Cipher Digital while cutting the company’s price target to $27.50 from $51.50, a 46.6% reduction. The revised target implied 320.2% upside from Cipher Digital’s November 6 close of $6.54.

Financing assumptions drove the revision

The bank’s note, led by analyst Stephen Byrd, raised construction costs and debt assumptions for Cipher Digital’s pipeline. Morgan Stanley increased the pipeline discount rate to 11.6% from 9.6%, raised the debt coupon to 9.3% from 7.6%, and increased estimated construction costs to $11.5 million per MW from $10.5 million.

The changes reduced the bank’s base-case pipeline value for Cipher Digital to $8.3 billion from $16.39 billion. Morgan Stanley also assigned Colchis a 75% energization probability, down from 90%, and estimated Barber Lake’s final cost at about $13 million per MW after overruns.

The Overweight rating remained unchanged

Morgan Stanley left the ratings on the covered powered-shell providers unchanged. Cipher Digital, Riot Platforms, Hut 8 and Galaxy retained Overweight ratings, while Applied Digital remained Equal-weight.

Morgan Stanley also raised its Riot Platforms price target to $41 from $35.50 while reducing targets for Hut 8, Galaxy and Applied Digital. The bank nevertheless described weakness in the group as unwarranted and called the selloff a buying opportunity.

Revenue expectations remained sharply divided by year

Cipher Digital’s consensus revenue estimate was $160 million for the current year, reflecting a shrinking mining business, and $840 million for 2027 as leases were expected to begin contributing. Those figures were analyst estimates rather than reported results. At the November 6 close, Cipher Digital traded at 4.7 times forward sales, compared with a three-year average of 11.4 times.

Lease funding remains the key question for Cipher Digital

The revised valuation depended on Cipher Digital funding additional builds while its tenants began paying rent. The company sold $850 million of convertible notes in October to help fund more of Barber Lake. Morgan Stanley’s model did not establish that the next project would be financed primarily with project debt.

Cipher Digital’s ability to execute and energize its pipeline also remained relevant. The bank lowered the assigned probability for Colchis and raised its cost assumptions for Barber Lake, while maintaining its Overweight rating on the stock.

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