Riot Blockchain remains a buy, says Roth Capital
Despite the tougher crypto mining climate, Roth Capital Partners analyst Darren Aftahi remains bullish Riot Blockchain (Riot Blockchain Stock Quote, Charts, News, Analysts, Financials NYSE:RIOT), says in a Tuesday update to clients that Riot’s strong capital position will help it through the current crypto winter.
Riot Blockchain, which has bitcoin mining operations in central Texas and electrical switchgear and fabrication operations in Denver, Colorado, provided a production and operations update for November earlier this month. The company’s final hash rate was approximately 7.7 EH/s, which was up 11.6 percent month-over-month, after adding approximately 6,900 machines. RIOT produced around 521 BTC during November, up 2.4 percent from October. The company had approx. 6,897 BTC as of November 30, and Riot sold 450 bitcoin during the month for a net income of around $8.1 million. (All figures in US dollars.)
“Despite this new production level, the expected production was approximately 660 Bitcoin given our operating hash rate during the month, assuming normalized performance of the mining pool we participate in,” CEO Jason Les said in a press release.
“Variance in a mining pool can affect results, and while this variance should balance out over time, it can be volatile in the short term. This variance led to lower than expected Bitcoin production in the month of November, relative to our hash rate, ” he said.
Commenting on the results, Aftahi said that while month-on-month growth did not accelerate compared to October’s growth, Riot’s deployment pace was still strong and one that could allow RIOT to finish the year close to Roth’s target of around 8.3 EH/s.
Aftahi highlighted Riot’s balance sheet strengths, which included $372.3 million in cash at the end of the third quarter along with current bitcoin holdings. It looks strong compared to its mining peers, Aftahi said.
“Continued economic headwinds from other miners create an opportunity for RIOT to take advantage of slower network hash rate growth (increased market share) and potentially see better pricing on future machine orders, given OEMs will need to remain price competitive with used machines hitting the market. These the factors create a favorable growth environment during a BTC bear cycle for a well-capitalized BTC miner,” Aftahi wrote.
Looking ahead, Aftahi projects full 2022 revenue of $267.8 million and EBITDA of negative $44.1 million and moves to 2023 revenue of $411.3 million and EBITDA of $91.7 million.
With the update, Aftahi reiterated a “Buy” rating on RIOT along with a 12-month target of $11.00, which at press time represented a projected one-year return of 188 percent.
