Investing.com - H.C. Wainwright has reiterated its Sell rating and $45.00 price target on Iris Energy (NASDAQ:IREN) despite the company’s recent announcement of a major cloud contract with Microsoft. This rating comes even as InvestingPro data shows IREN is currently trading at $67.75, with analysts having a consensus recommendation of 1.85 (Buy).
IREN shares jumped 11.5% on Monday following news of a five-year, $9.7 billion AI cloud contract with Microsoft to deploy approximately 76,700 NVIDIA GB300 GPUs across 200 MW of capacity at its Childress, Texas campus. This continues the stock’s remarkable momentum, with InvestingPro data showing a 696% return over the past year and nearly 938% over the last six months, though the stock appears overvalued according to InvestingPro’s Fair Value assessment.
The contract is expected to generate $1.94 billion in annualized run-rate revenues at approximately 85% EBITDA margins and includes a 20% upfront prepayment from Microsoft to be credited against payments in years 3-5. The company’s current EBITDA stands at $201.69 million with revenue of $501.02 million for the last twelve months, indicating this deal represents a transformative expansion.
IREN plans to deliver the capacity in four 50 MW tranches, with full deployment expected by the end of 2026, bringing its total estimated annual recurring revenue for its AI Cloud business to approximately $2.5 billion by that time. With analysts forecasting 129% revenue growth for fiscal year 2026, this contract aligns with expectations for continued expansion.
In conjunction with the cloud contract, IREN announced a $5.8 billion agreement with Dell Technologies to purchase the required GPUs and equipment, though H.C. Wainwright cited financing and GPU procurement risks as concerns given the scale and projected timing of these deployments. While InvestingPro data shows IREN operates with a moderate debt level and has a healthy current ratio of 4.29, the company’s high volatility (Beta of 4.2) and elevated P/E ratio of 154 highlight potential risks. Discover the comprehensive Pro Research Report on IREN and 1,400+ other US stocks through InvestingPro.
In other recent news, IREN Limited has secured a significant multi-year GPU cloud services contract with Microsoft, valued at approximately $9.7 billion over five years.
This agreement includes a 20% prepayment by Microsoft and involves IREN acquiring NVIDIA GB300 GPUs and related equipment from Dell Technologies for around $5.8 billion.
Additionally, IREN has completed a $1 billion convertible notes offering, which was oversubscribed, leading to an additional $125 million in notes being issued.
The zero-coupon notes, due in 2031, were sold to qualified institutional buyers.
In a separate development, H.C. Wainwright downgraded IREN from Neutral to Sell, citing valuation concerns and execution risks. The firm set a price target of $45.00, noting that IREN shares have seen a dramatic increase over the past six months. Meanwhile, IREN also announced the pricing of $875 million in convertible senior notes, which carry an initial conversion rate reflecting a 42.5% premium over the company’s recent stock price. These developments highlight IREN’s strategic financial maneuvers and the mixed sentiment from analysts.
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