Iren (IREN) shares fell 10% today after a senior JPMorgan analyst issued a bearish note on the data center company.
On Friday, analyst Reginald Smith downgraded IREN stock to “Underweight” and announced a $24 price target, indicating the potential for another 40% decline from current levels.
Despite today’s pullback, IREN shares are trading at more than 7x their price in early April.
In a research note this morning, Smith cited valuation concerns for downgrading IREN shares.
The Nasdaq-listed firm is currently trading at a forward price-earnings (P/E) ratio of roughly 67x, which trumps the multiples on best-of-breed AI stocks, even including Nvidia (NVDA), that’s going for 42x only.
According to the JPM analyst, the company’s current share price already factors in overly optimistic scenarios, particularly regarding the potential colocation deal that could require over $10 billion in capital expenditure.
Without concrete revenue-generating deals, IREN stock’s current premium is hard to justify, even with its artificial intelligence (AI) and high-performance computing (HPC) ambition, he concluded
Options data from Barchart signals heightened volatility in IREN stock with a near-term expected move of 10.18% through the end of next week.
Looking further out, contracts expiring Dec. 19 suggest a broader range, from $25.66 on the downside to $57.18 on the upside.
While this signals meaningful upside potential, JPMorgan’s downgrade highlights execution risk. Without revenue accretive deals to support the company’s AI and HPC commitment, the downside scenario may be more realistic.
All in all, investors should weigh speculative enthusiasm against valuation discipline, especially as IREN shares trade well above the industry average multiple.
Investors should also note that JPMorgan is not the only Wall Street firm recommending caution in buying IREN shares at current levels.
According to Barchart, the consensus rating on IREN stock remains at “Moderate Buy” but the mean target of roughly $36 indicates potential downside of another 10% from here.
