One Crypto Mining Stock to Punt On-RIOT

Jan 28, 2022 12:00 AM PST | Team Kalkine
One Crypto Mining Stock to Punt On-RIOT

Riot Blockchain, Inc.

RIOT Details

Riot Blockchain, Inc. (NASDAQ: RIOT) operates a cryptocurrency mining business that employs specialized computers with application-specific integrated circuit (ASIC) chips.

Latest News:

  • Increase in Blockchain Production & Operations: The company's latest quarter production has increased by 349% to 1355 BTC in Q4FY21 compared to 302 BTC in Q4FY20. The company has expanded its hash rate capacity estimate by 3.8 EH/s to 12.8 EH/s, a 42% increase over the previous estimate of 9.0 EH/s.
  • Increase in Assets: In Q3FY21, the group has added goodwill of USD 267.24 million. In addition, the group invested in other current and fixed assets.

Q3FY21 Results:

Source: Company Website

 Record increase in top line: The total revenue has increased to USD 64.81 million in Q3FY21 from USD 2.46 million in Q3FY20, mainly on account of substantial growth in the blockchain sector.

  • Decrease in bottom line: The company has posted a net loss of USD 15.34 million in Q3F21 from USD 1.71 million in Q3FY20.

Key Risks:

  • Delay in creating mining infrastructure: The company may face delays or unforeseen challenges in constructing its 200 MW liquid immersion-cooled Bitcoin mining infrastructure.
  • Supply side disruption: Excessive dependency on the small number of suppliers may cause delays and limit its ability to control pricing and quality.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Analysis by Kalkine Group

Stock Recommendation:

RIOT’s share price has decreased by 57.84% in the past six months and is currently leaning towards the 52-week low of USD 12.90. Moreover, the company has reported solid jump in topline. However, losses have expanded because of higher operating expenses. We have valued the stock using the EV / Sales multiple based relative valuation methodology and arrived at a target price of USD 15.58 as of January 27, 2022.

Considering the major correction in the stock price, growing business model, strong revenue track record, risk associated and current valuation, we recommend a “Speculative Buy" rating on the stock at the closing price of USD 13.45 as of January 27, 2022.

RIOT Daily Technical Chart (Source: REFINITIV, Analysis by Kalkine Group)

Technical Summary Analysis

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.