Riot Blockchain, Inc.

RIOT Details

Riot Blockchain, Inc. (NASDAQ: RIOT) runs a cryptocurrency mining business that employs specialized computers (miners) with application-specific integrated circuit (ASIC) chips to solve complicated cryptographic algorithms in support of the Bitcoin blockchain (in a process known as solving a block) in return for cryptocurrency incentives, principally Bitcoin (BTC). As of October 19, 2021, the company's market capitalization stood at USD 2.96 billion.

Latest News

• First Industrial Scale BTC Mining Operations: On October 19, 2021, RIOT announced the development of 200 megawatts of immersion-cooling technology at its Whinstone plant, the first industrial-scale immersion-cooled deployment of Bitcoin mining equipment, as per the company's awareness.

• September BTC Production Data: On October 5, 2021, RIOT stated that it generated 406 BTC in September 2021, a 346% increase over its September 2020 output of 91 BTC. As a result, the RIOT has about 3,534 BTC as of September 30, 2021; all generated through their self-mining operations. With a hash rate capacity of 2.6 exahash per second (EH/S), the company now has a deployed fleet of roughly 25,646 miners.

H1FY21 Results:

• Robust increase in Revenue: RIOT reported a massive rise in 13.30x YoY in total revenues to USD 57.55 million during H1FY21 compared to USD 4.33 million during H1FY20.
• Positive Earnings: It has witnessed a positive net income of USD 26.87 million during H1FY21 vs. a net loss of USD 14.87 million during H1FY20.
• Strong Balance Sheet: As of June 30, 2020, the company's cash and cash equivalents (including investments in marketable securities and cryptocurrencies) stood at USD 220.24 million with no outstanding debt.

Key Risk:

• Increasing Cost of Miners: The cost of getting new and replacement miners may grow if the present relatively high market price of bitcoin persists, which might have a substantial and detrimental effect on its financial position and results of operations.
• Reliance on Third-Party Mining Pool service providers: RIOT receives cryptocurrency mining earnings from its mining activities through a third-party mining pool operator. RIOT's capacity to mine and receive income may be harmed if the pool operator's system is down due to a cyber-attack, software failure, or other similar difficulties.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

RIOT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

RIOT's share price has fallen 20.05% in the past six months and is currently trading below the mid-point of the 52-week range of USD 3.14 to USD 79.50. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 59.38. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 37.30.

Considering the company's growth prospects, the volatile underlying asset, enhancing operational capacities, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 30.83, up 3.46% as of October 19, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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