3 Blockchain Stocks to Sell Before They Lose Even More Ground
A blockchain is a form of ledger technology that stores records in a decentralized manner, making them difficult or impossible to change. Therefore, it has received massive attention for use in various applications to make our digital existence more secure and traceable.
However, along with the general technology industry, blockchain companies have come under increasing pressure due to aggressive interest rate increases from major central banks in their efforts to contain stubborn inflation. Also, cryptocurrency, one of the most important use cases of blockchain technology, is increasingly facing regulatory concerns and sales.
Federal Reserve Chairman Jerome Powell cited a “real need for a more appropriate regulation“, and JPMorgan CEO Jamie Dimon went one step further to call cryptocurrencies “decentralized Ponzi schemes.” As a result of these headwinds acting in tandem with investors’ growing concern over risky assets amid the uncertain economic environment, the most popular cryptocurrency, Bitcoin, crashed below $19,000 last week.
Given blockchain’s bleak growth outlook, we think it would be wise to sell fundamentally weak blockchain stock Block, Inc. (SQ), Marathon Digital Holdings, Inc. (MARA), and Riot Blockchain, Inc. (RIOT) to avoid further losses.
Block, Inc. (SQ)
SQ is a technology company that creates tools to enable businesses, sellers and individuals to participate in the digital economy. The company operates through two segments: Square and Cash App.
On September 22, SQ announced that it would offer “Buy Now, Pay Later” (BNPL) functionality to merchants using SQ’s e-commerce products across Canada. This marks the company’s first integration with Afterpay in the country. BNPL is a risky play for SQ, with Apple Inc. (AAPL) and Affirm Holdings, Inc. (AFRM) appear as rivals in this area.
Additionally, according to a report by UBS analyst Rayna Kumar, The “risk profile” of Afterpay has changed amid rising interest rates and the potential for increased regulation.
On August 24, it was announced that a class action lawsuit had been filed against SQ on allegations of negligent security following a breach of 8.2 million users’ data in the Cash app. The company disclosed the breach through an SEC filing four months after the incident without explaining the delay.
On August 19, the Consumer Financial Protection Bureau (CFPB) filed a petition asking a federal judge to compel SQ to fully comply with the demands of an investigation into Cash App’s handling of payments and disputes. The company has yet to provide all the documents and data requested by the agency in August 2020 and August 2021.
SQ’s net revenue fell 5.9% year-over-year to $4.40 billion for the second quarter of fiscal 2022 that ended June 30. The company reported an operating loss of $213.77 million for the quarter, compared to $124.99 million in the year-ago period. It is adjusted EBITDA for the quarter fell 47.9% year-over-year to $187.34 million
Additionally, the company reported adjusted net income and adjusted net earnings per share of $110.74 million and $0.36, down 56.8% and 63.3%, respectively, from the prior year.
Analysts expect SQ’s revenue for the fiscal year (ending December 2022) to decline 0.6% year-over-year to $17.56 billion. The company’s EPS for the current year is expected to fall 48.9% year-over-year to $0.87. The stock has fallen 19.7% in the past month and 66.5% so far this year.
SQs POWR Ratings is consistent with its dismal performance and bleak outlook. 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 also has a D grade for stability, sentiment and quality. It is ranked #87 out of 101 F-rated stocks Financial services (business) industry.
click here to access additional assessments for SQ’s growth, momentum and value.
Marathon Digital Holdings, Inc. (MARA)
MARA is a digital asset company focused on the blockchain ecosystem and digital asset generation. The company mines cryptocurrencies and holds bitcoins in an investment fund.
On August 1, MARA expanded its credit facility by increasing its debt financing capacity by $100 million. This facility is expected to increase the company’s debt burden, with rising interest rates threatening to further damage the bottom line.
MARA’s revenue for the second quarter of fiscal 2022 ended June 30 fell 15% year over year to $24.92 million. During the same period, the company’s operating loss and adjusted EBITDA increased by 61.6% and 40.1% year-over-year to $178.21 million and $147.20 million, respectively.
Furthermore, the company’s quarterly net loss worsened 76% year-over-year to $191.65 million, while its loss per share of $1.75 worsened 60.6% year-over-year.
Analysts expect MARA’s earnings and loss per share for the third quarter of fiscal 2022 (ended September 2022) to worsen by 46.1% and 31.8% year-over-year to $27.85 million and $0.29, respectively. Also, the company has missed consensus EPS estimates in each of the last four quarters.
MARA’s stock has lost 7.8% in the past month and 67.4% so far this year.
MARA’s weak fundamentals are reflected in the POWR ratings. It has an overall F rating, which equates to strong sales in our proprietary rating system. It has an F rating for growth, value, stability, sentiment and quality.
click here to see more reviews for MARA.
Riot Blockchain, Inc. (RIOT)
RIOT focuses on Bitcoin and general blockchain technology. The company operates in the overall blockchain ecosystem through its cryptocurrency mining operations, internally developed businesses, joint ventures and targeted investments in the sector.
For the second quarter of fiscal 2022 ended June 30, RIOT’s adjusted EBITDA for the quarter came in at a negative $65.17 million, compared to a gain of $2.39 million in the same period a year earlier. The company’s net loss came in at $366.3 million, compared to net income of $19.3 million in the previous quarter.
Additionally, the company reported an adjusted quarterly loss of $0.50, compared to an adjusted EPS of $0.03 in the year-ago quarter.
Analysts expect RIOT’s revenue for the third quarter of fiscal 2022 ended Sept. 30 to decline 4% year-over-year to $62.24 million. The company is expected to report a net loss per share of $0.03 for the same period. Also, it has missed consensus EPS estimates in three of the last four quarters.
The stock has fallen 68.2% over the past six months and 72.7% over the past year.
RIOT’s gloomy outlook is reflected in the POWR ratings. It has an overall F rating, which equates to strong sales in our proprietary rating system. It also has an F grade for stability, sentiment and quality and a D grade for value.
It is ranked second last among 79 shares in D-rated Technology – Services industry.
click here to view the additional assessments of RIOT for Growth and Momentum.
SQ shares were trading at $53.95 per share on Monday morning, down $1.04 (-1.89%). So far this year, SQ has fallen -66.60%, compared to a rise of -23.45% in the benchmark S&P 500 over the same period.
About the Author: Santanu Roy
After becoming fascinated by the traditional and evolving factors that influence investment decisions, Santanu decided to pursue a career as an investment analyst. Before switching to investment analysis, he was a process associate at Cognizant. With a master’s degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More…
