Are Shares of Riot Blockchain a Buy as Bitcoin Soars?

Riot Blockchain, Inc. (RIOT) is involved in building, supporting, and operating blockchain technologies ecosystem and digital currency mining. The company also provides accounting, audit, and verification services for blockchain based assets, such as cryptocurrencies. 

Bitcoin surged more than 250% in the past nine months to reach close to its record high before plunging yesterday. However, the historically low Fed interest rates combined with the slow recovery of the US economy (as indicated by rising unemployment) could help bitcoin rebound quickly. Moreover, the search for a hedge against the weak dollar could help bitcoin return to its bull run. 

The adoption of bitcoin this year by the fintech giant PayPal (PYPL) can boost RIOT’s bitcoin mining segment. The stock gained 532.1% year-to-date. This impressive performance combined with several other factors has helped RIOT earn a “Strong Buy” rating in our proprietary rating system. 

Here’s how our proprietary POWR Ratings system evaluates RIOT:

Trade Grade: A

RIOT is currently trading above its 50-day and 200-day moving averages of $3.71 and $2.49, respectively, indicating that the stock is in an uptrend. The stock gained 97.8% over the past three months, reflecting solid short-term bullishness.

RIOT’s revenue increased 41.5% year-to-date to $2.46 million in the third quarter ended September 2020. The increase in revenue was primarily attributable to growth in the bitcoin mining revenue.

RIOT recently purchased an additional 2,500 next generation S19 Pro Antminer cryptocurrency for USD $6.10 million from BitmainTech. The expansion of its mining operation will help the company to reach 842 PH/s in operational hash rate by late December 2020. 

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, RIOT is well positioned. The stock is currently trading just 6.8% below its 52-week high of $7.60.

The company’s net revenue grew at a CAGR of 335.6% over the past three years. This was primarily driven by a substantial increase in its mining and cryptocurrency revenue.

Peer Grade: A

RIOT is currently ranked #10 out of 54 stocks in the Technology – Services industry. Other popular stocks in this industry are Flex Ltd. (FLEX), SYNNEX Corporation (SNX) and TTEC Holdings, Inc. (TTEC).

SNX, FLEX, and TTEC gained 25.6%, 32.6%, and 71.2% year-to-date, respectively. This compares to RIOT’s 532.1% returns over this period.

Industry Rank: D

The Technology – Services industry is ranked #111 out of the 123 industries. The companies in this industry provide varying services like blockchain technology, digital currency mining, information technology (IT) products, and supply chain and mobile device lifecycle services. 

The COVID-19 pandemic has impacted financial markets all over the world. The major economic turmoil associated with the pandemic and the stock market crash following it has pushed more people to shift from the highly volatile cryptocurrencies toward safer investment bets, thereby driving down their demand. 

Overall POWR Rating: A (Strong Buy)

RIOT is rated “Strong Buy” due to its impressive financials, short-and-long-term bullishness and solid price momentum, as determined by the four components of our overall POWR Rating.

Bottom Line

RIOT is well positioned to soar in the upcoming months despite gaining 532.1% year-to-date. As the global economy is adopting digital transactions pretty fast, the demand for bitcoin is expected to reach new highs in the near future. Also, as big players and retail investors shift toward cryptocurrency, the strengthening demand for Bitcoin is expected to accelerate RIOT’s growth. Hence, the stock is expected to soar based on its continued business growth, favorable earnings and revenue outlook, and strong financials. 

Analyst sentiment, which gives a good sense of a stock’s future price movement, is pretty impressive for RIOT. It has an average broker rating of 1, indicating favorable analyst sentiment. The consensus EPS estimate of $0.02 for the next year indicates a slight improvement year-over-year. The consensus revenue estimate of $53.30 million for the next year indicates a 412.5% increase from the same period last year.

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RIOT shares were trading at $6.25 per share on Friday afternoon, down $0.83 (-11.72%). Year-to-date, RIOT has gained 458.04%, versus a 14.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More…

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