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small-cap

Book Profits on This NASDAQ-Listed Cryptocurrency Stock – RIOT

Feb 11, 2022 | Team Kalkine
Book Profits on This NASDAQ-Listed Cryptocurrency Stock – RIOT

Riot Blockchain, Inc. 

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Riot Blockchain, Inc. (NASDAQ: RIOT) is a cryptocurrency mining company that uses specialized computers outfitted with application-specific integrated circuit (ASIC) chips to solve complex cryptographic algorithms in support of the Bitcoin blockchain in exchange for cryptocurrency incentives (primarily Bitcoin). Previously, the company mined Bitcoin cash and litecoin; however, it has shifted its concentration to mining Bitcoin. 

Why should investors Book Profits? 

  • Operating Losses and Bottomline Stress: Operating losses increased to USD 4.21 million in Q3FY21 (ended September 30, 2021) from USD 2.11 million in Q3FY20. It also disclosed that net losses increased to USD 15.34 million in Q3FY21, up from USD 1.72 million in Q3FY20. The company's net margin declined to -23.7% in Q3FY21 from 56.3% in Q2FY21, indicating a significant pressure on its bottom line. 
  • Decline in Cash Position: The company's cash and cash equivalents (including marketable securities and cryptocurrencies) fell to USD 173.84 million as ofSeptember 30, 2021, from USD 235.01 million as ofDecember 31, 2020, indicating future capital requirement problems.Page Break 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation 

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(Analysis by Kalkine Group) 

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:  

RIOT's stock price has been volatile throughout the year. It has fallen 47.68% in the past six months and surged 30.29% in the past week. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 15.00. Considering the significant volatility in the stock price, increase in losses, current valuation, and other technical indicators, we believe the fundamentals are adequately reflected at the current trading levels. Hence, we recommend a 'Sell' rating on the stock at the closing price of USD 19.65 as of February 09, 2022. 

 

One-Year Technical Price Chart (as of February 09, 2022). Source: REFINITIV, Analysis by Kalkine Group 

 

* The reference data in this report has been partly sourced from REFINITIV. 

* All forecasted figures and industry information have been taken from REFINITIV.