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Riot Blockchain Stock Appears Poised for a Rally

Stock MarketsSep 17, 2021 06:31PM ET
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© Reuters. Riot Blockchain Stock Appears Poised for a Rally

Ark Invest CEO Cathie Wood has reiterated her long-term price target of $500,000 for Bitcoin. This might be optimistic. However, there is no doubt that Bitcoin adoption has been increasing, with participation from individual and institutional investors.

In the unregulated space, having a cryptocurrency portfolio might seem like a good idea. At the same time, there are listed companies that provide proxy-exposure to the world of cryptocurrencies.

Riot Blockchain (NASDAQ:RIOT) is a Bitcoin miner, and one of the more interesting names among cryptocurrency stocks. RIOT stock has been trending lower in the last six-months, with a correction of 47.6%. However, the stock has still soared by 863% over the past 12 months. (See RIOT stock charts on TipRanks)

After some big movement and volatility, RIOT stock finally seems to be in a consolidation range. I am bullish on Riot Blockchain, with the company positioned for strong growth in the coming years.

Strong Quarterly Numbers

Supported by accelerated mining activity, Riot reported healthy numbers in Q2 2021. The company’s mining revenue increased by 1,540% to $31.5 million. For the same period, the company’s mining revenue margin was 70%, as compared to 25% in the prior year period.

It’s also worth noting that as of Q2 2021, the company reported cash and Bitcoin holdings of $195.4 million. This provides the company with ample financial headroom to pursue aggressive expansion.

Best Part of Growth to Come

For Riot Blockchain, the best part of revenue and cash flow growth is still to come. To put things into perspective, Riot mined 491 Bitcoins in Q1 2021. In the last quarter, the number of Bitcoins mined increased to 675.

Further, Riot mined 441 Bitcoins in August, with a hash rate capacity of 2.2 exahash per second (EH/s). Mining activity has therefore been increasing at a robust pace, and this is likely to translate into higher revenue and cash flows.

Another important point to note is that Riot is targeting hashing capacity of 7.7 EH/s by Q4 2022, which would translate to mining, 1,544 Bitcoins on a monthly basis by Q4 2022.

Assuming that Bitcoin trades at $50,000, the company is positioned to deliver monthly revenues of $77.2 million by Q4 2022. This would further imply an annualized revenue potential in the range of $900 million to $1 billion.

It also seems very likely that Riot will continue to pursue further expansion. As the hashing capacity increases, the company’s Bitcoin holdings will also swell. This can be utilized for expansion or diversification projects.

In May 2021, Riot announced the acquisition of Whinstone US. The latter is the owner of North America’s largest Bitcoin mining and hosting facility.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, RIOT stock comes in as a Strong Buy, with four Buys assigned in the past three months.

The average RIOT price target is $47.75 per share, implying 63.7% upside potential from current levels.

Concluding Views

The cryptocurrency market can be likened to the early stages of the technology boom. It therefore makes sense to consider some exposure to this high-growth asset class.

Riot Blockchain seems attractive, with the company likely to grow at a stellar pace in the coming quarters.

Importantly, the increase in financial flexibility will allow Riot Blockchain to spread its wings within the world of cryptocurrencies.

Disclosure: At the time of publication, Faisal Humayun did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

Riot Blockchain Stock Appears Poised for a Rally
 

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