3 Blockchain Stocks to Keep Off Your Radar Amid Crypto Turmoil

Following the collapse of Silicon Valley Bank and Signature Bank, all major cryptocurrencies have rallied from their lows as investors turned to digital assets in hopes that digital currency could replace the traditional banking system and its failures.

However, the cryptocurrency market’s ongoing volatility could pressure blockchain stocks. Therefore, you may want to avoid fundamentally weak blockchain stocks Block, Inc. (SQ), Riot Platforms, Inc. (RIOT), and HIVE Blockchain Technologies Ltd. (HIV).

Before we dive deeper into the fundamentals of these stocks, let’s discuss what’s going on in the crypto space and why it might be wise to avoid these blockchain stocks.

The cryptocurrency industry has faced significant headwinds since last year. Several cryptocurrency exchanges went bankrupt, and the prices of all major cryptocurrencies fell, leading to huge losses for investors. In March, the crypto industry downturn led to the closure of Silvergate Capital Bank.

Blockchain plays an important role in how the cryptocurrency market works. Blockchain technology is the best option for building a secure and efficient digital currency system due to its decentralized and transparent nature. Several companies either specialize in blockchain technology, have adopted blockchain in their business, or directly profit from using cryptocurrencies.

However, due to the high volatility of the cryptocurrency market, investing in the mentioned blockchain names can be very risky. The cryptocurrency market is dependent on the Fed’s statement that it wants to stop the rate hikes after announcing its 10th hike off 25 basis points last week.

However, the Fed’s decision will depend on the amount of macroeconomic data to be released. Any increase in inflation will prompt the Fed to continue its interest rate hikes to reach its long-term inflation target. This could harm the prospects of the cryptocurrency market.

Also, the uncertainty surrounding cryptocurrency regulations in the US could be a headwind for the industry.

Let’s discuss the basics of the featured stocks.

Block, Inc. (SQ)

SQ is focused on creating ecosystems for distinct customer audiences. The company operates through two segments: Square and Cash App. The Square segment enables businesses to accept card payments, offering products and services to help merchants start, operate and grow their businesses. The Cash App segment provides an ecosystem of financial products and services to help customers manage their money.

SQ’s 34.94% trailing 12-month gross profit margin is 41.5% lower than the industry average of 59.75%. Similarly, the trailing 12-month EBIT margin is a negative 2.28% compared to the industry average of 21.44%. Furthermore, the stock’s 1.40% trailing 12-month leveraged FCF margin is 91.2% lower than the industry average of 15.99%.

Total operating expenses for the first quarter ended March 31, 2023, increased 13.4% year over year to $1.72 billion. The company’s long-term debt rose marginally to $4.11 billion, compared to $4.10 billion for the fiscal year ending December 31, 2022.

In addition, its total current debt increased 3.2% to $8.70 billion, compared to $8.43 billion for the fiscal year ending December 31, 2022. Also, bitcoin costs rose 25.2% year-over-year to 2.11 billion dollars.

Over the past year, the stock has fallen 38.9% to close last trade at $58.80.

SQ’s weak outlook is reflected in its POWR Ratings. The share has an overall D rating, which corresponds to a sell in our proprietary rating system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted optimally.

It is ranked #75 out of 97 F-rated stocks Financial services (business) industry. It has a D grade for stability, sentiment and quality. click here to see the other ratings of SQ for Growth, Value and Momentum.

Riot Platforms, Inc. (RIOT)

RIOT operates as a Bitcoin mining company. It operates through the Bitcoin Mining, Data Center Hosting and Engineering segments. The company also provides co-location services for institutional-scale bitcoin miners and critical infrastructure workforce for institutional-scale miners to deploy and operate their miners.

RIOT’s trailing 12 month gross profit margin of 25.26% is 48.9% lower than the industry average of 49.43%. Likewise, its trailing 12-month EBITDA margin is a negative 57.62% compared to a 9.30% industry average. Furthermore, the stock’s negative 196.61% trailing 12-month net income margin compares to the industry average of 2.61%.

For the fiscal year ending December 31, 2022, RIOT’s adjusted EBITDA loss came in at $67.19 million, compared to adjusted EBITDA of $74.91 million in the same period last year. The net loss increased significantly to $509.55 million. The company’s adjusted loss per share came in at $0.47, compared to adjusted EPS of $0.79 in the same period last year.

For the quarter ending March 31, 2023, RIOT’s EPS is expected to be negative. Revenue for the same quarter is expected to fall 4% year-over-year to $76.63 million. It failed to beat the consensus EPS estimate in three of the last four quarters. Over the past year, the stock has risen 10.5% to close at a recent trade of $10.49.

RIOT’s weak fundamentals are reflected in the POWR ratings. It has an overall rating of F, which means strong sales in our proprietary rating system.

It has an F grade for growth, value, stability and quality and a D for sentiment. Within Technology – Services industry, it is ranked last out of 79 stocks. To see RIOT’s rating for Momentum, click here.

HIVE Blockchain Technologies Ltd. (HIV)

Headquartered in Vancouver, Canada, HIVE operates as a cryptocurrency mining company in Canada, Sweden and Iceland. It mines and sells digital currencies, including Ethereum, Ethereum Classic, and Bitcoin.

HIVE’s 0.41x trailing 12-month sales ratio is 33.9% lower than the 0.62x industry average. Likewise, its trailing 12-month EBITDA margin is negative 25.54% compared to the industry average of 9.30%. Furthermore, the stock’s negative 99.29% trailing 12-month EBIT margin compares to the industry average of 4.66%.

For the third quarter ended Dec. 31, 2022, HIVE’s net loss came in at $90.01 million, compared with net income of $51.19 million a year ago. Digital currency mining revenue fell 79% year-over-year to $14.31 million. The loss per share came in at $1.09, compared to an EPS of $0.62 in the prior quarter.

Analysts expect HIVE’s EPS for the quarter ended March 31, 2023 to remain negative. Revenue for the same quarter is expected to fall 66.5% year-over-year to $17.30 million. It failed to beat Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has fallen 56.1% to close the last trade at $3.07.

HIVE’s POWR ratings reflect this weak outlook. It has an overall rating of F, which means strong sales in our proprietary rating system.

It is ranked #76 in the same industry. It has an F grade for value and stability and a D for quality. click here to see the other reviews of HIVE for Growth, Momentum and Sentiment.

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SQ shares were down $0.50 (-0.85%) in premarket trading on Tuesday. So far this year, SQ has fallen -7.22%, compared to an increase of 7.99% in the benchmark S&P 500 over the same period.

About the Author: Dipanjan Banchur

Since he was in primary school, Dipanjan was interested in the stock market. This led to him taking a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing new trends in the financial markets. More…

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