Cipher Stock: Wells Fargo Sees High Risk, High Reward

Wells Fargo initiated coverage of Cipher (NASDAQ: CIFR) on Thursday, assigning an Overweight rating and a $25 price target, indicating a potential 49.5% increase from its previous closing price. Analyst Eric Luebchow described the company as a "high-risk/high-reward" entity, noting that its stock currently trades at a premium to its contracted net asset value. Significant upside is contingent upon Cipher successfully transforming its development pipeline into contracted and operating capacity.

The bank's analysis estimates Cipher's contracted portfolio at approximately $10 per share on a net present value basis. This figure adjusts to $12 per share when accounting for unrestricted parent cash and estimated capitalized selling, general, and administrative costs. Wells Fargo specifically highlighted substantial leases, including 286 MW directly with Amazon Web Services and 207 MW with Fluidstack, which is supported by Google. These agreements are projected to yield mid-teens NOI yields post-delivery, surpassing Cipher's cost of capital.

Cipher's 3.2 GW of conditional ERCOT Batch Zero classifications for its Texas data-center projects have attracted considerable investor interest. These designations permit progress within ERCOT's new process for loads exceeding 75 MW but do not guarantee final interconnection approval or establish energization dates. Cipher disclosed approximately 3.4 GW of Texas pipeline capacity across seven sites in its 2025 annual filing, within a broader 4.2 GW development and operating portfolio. Texas initiated a review of these projects following Governor Greg Abbott's order for an audit covering ownership, incentives, electricity, and water usage.

Previously, Rosenblatt maintained a Buy rating and a $30 target for Cipher following the disclosure of the ERCOT classifications. However, Rosenblatt kept its forecasts unchanged as Cipher had not yet specified the division of the 3.2 GW between ERCOT's base-load and studied-load categories. To retain the Batch Zero positions, Cipher must fulfill ERCOT's verification and audit requirements. The ERCOT verification audit is scheduled for December 10, with study results for qualified large-load projects anticipated by April 9, 2027.