Riot Blockchain is still a Buy, says Roth Capital

Despite the tougher crypto-mining climate, Roth Capital Partners analyst Darren Aftahi is staying bullish on Riot Blockchain (Riot Blockchain Stock Quote, Charts, News, Analysts, Financials NYSE:RIOT), saying 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 engineering and fabrication operations in Denver, Colorado, provided a November production and operations update earlier this month. The company’s ending hashrate was about 7.7 EH/s, which was up 11.6 per cent month-over-month, after the addition of about 6,900 machines. RIOT produced about 521 BTC over November, up 2.4 per cent from October. The company held approx. 6,897 BTC as of November 30, and Riot sold 450 bitcoin over the month for net proceeds of about $8.1 million. (All figures in US dollars.)

“Despite this new level of production, expected production was approximately 660 Bitcoin given our operating hash rate over the month, assuming normalized performance of the mining pool we participate in,” said CEO Jason Les in a press release. 

“Variance in a mining pool can impact results and while this variance should balance out over time, can be volatile in the short term. This variance led to lower Bitcoin production than expected in the month of November, relative to our hash rate,” he said.

Commenting on the results, Aftahi said while the month-over-month growth didn’t accelerate compared to October’s growth, Riot’s deployment pace was still strong and one which could allow RIOT to end the year near Roth’s target of about 8.3 EH/s.

Aftahi highlighted Riot’s strengths in terms of its balance sheet, which included $372.3 million in cash at the end of the third quarter along with current bitcoin holdings. That looks strong in comparison to its mining peers, Aftahi said.

“Continued financial headwinds from other miners creates an opportunity for RIOT to take advantage of slower network hashrate growth (gaining market share) and potentially see better pricing on future machine orders, given OEM’s would need to remain competitive on pricing with second-hand machines hitting the market. These factors create a favourable growth environment during a BTC bear cycle for a well-capitalized BTC miner,” Aftahi wrote.

Looking ahead, Aftahi is forecasting full 2022 revenue of $267.8 million and EBITDA of negative $44.1 million and moving 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 per cent.