Riot Blockchain, Inc.

RIOT Details

Riot Blockchain, Inc. (NASDAQ: RIOT) is a cryptocurrency mining company that uses specialized computers (miners) equipped with application-specific integrated circuit (ASIC) chips to solve complex cryptographic algorithms in support of the Bitcoin blockchain (a process known as block solving) in exchange for cryptocurrency incentives, primarily Bitcoin (BTC).

Latest News:

• April 2022 Production and Operations Updates: Riot produced 508 BTC in April 2022, up from 203 BTC in April 2021, a 150% gain. Riot had around 6,320 BTC on April 30, 2022, fully generated by the company's self-mining operations. Riot sold 250 Bitcoin in April 2022 for a net profit of about USD 10.0 million. Riot presently has a fleet of 46,375 miners deployed, with a hash rate capacity of 4.7 exahash per second.

Q1FY22 Results:

• Surge in Topline: The company reported a sharp uptick of 243.95% in revenues to USD 79.79 million in Q1FY22 (ended March 31, 2022) compared to USD 23.20 million in Q1FY21, driven by YoY growth of 150.05% in Revenue, net – mining and reporting of revenue by Revenue, net – hosting and Revenue, net – engineering.
• Expansion in Net Income: RIOT witnessed an increase in net income to USD 35.63 million in Q1FY22 vs. USD 7.53 million in Q1FY21.
• Healthy Balance Sheet: As of March 31, 2022, the company had a cash balance of USD 312.41 million with no outstanding debt.

Key Risk:

• Increasing Cost of Miners: Suppose the current relatively high market price of bitcoin continues. In that case, the cost of procuring new and replacement miners may rise, which might have a significant and negative impact on the company's financial condition and the results of operations.
• Reliance on Third-Party Mining Pool service providers: RIOT earns cryptocurrency mining earnings from its mining activity through a third-party mining pool operator. RIOT's ability to mine and receive payments may be impacted if the pool operator's system is down due to a cyber-attack, software failure, or other similar issues.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 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 fallen 81.6% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 6.25 to USD 46.28. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 7.99.

Considering the significant correction in the stock price, debt-free balance sheet, strong margins, current valuation, and associated risks. We recommend a "Speculative Buy" rating on the stock at the current price of USD 6.71, up 4.3% as of May 26, 2022, 08:40 AM PDT.

1-Year Technical Price Chart (as on May 26, 2022, at 08:40 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

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. 

Note 3: The report publishing date is as per the Pacific Time Zone.