Bitcoin mining company Riot Platforms (RIOT) presents an intriguing investment opportunity as it navigates a thriving market. A recent -36% correction has left the stock trading at a discount to industry peers. The upside potential for company growth is driven by the ongoing surge in Bitcoin prices and the execution of the company’s robust expansion plans. Riot aims to significantly increase its hash rate capacity, which is expected to trigger revenues and EBITDA growth.
At the same time, its strong balance sheet fundamentals afford the company high financial flexibility for aggressive investments. With these factors in play, Riot stock could deliver substantial returns for investors willing to take on a high-risk opportunity in the sector.
Riot’s Growing Hashrate
Riot Platforms specializes in Bitcoin mining and offers co-location services for large-scale Bitcoin mining operations. It aids these institutional-scale miners by providing the necessary infrastructure, workforce, and data center operation capabilities.
Riot has recently energized its Corsicana Facility, which is anticipated to be the world’s largest dedicated Bitcoin mining facility when fully operational. The facility has started hashing, and management expects the self-mining hash rate capacity to triple to 31 EH/s by the end of the year, with a potential of 1 GW total capacity when fully developed. It gives Riot a significant growth pipeline and a solid foundation for the future scaling of the Bitcoin mining business.
The company has also signed a long-term purchase agreement with MicroBT for immersion miners for the Corsicana Facility. These miners are expected to be deployed by the second half of 2025. When fully operational in 2025, Riot anticipates a total self-mining hash rate capacity of 41 EH/s.
Analysis of Riot’s Recent Financial Results
In the first quarter of 2024, the company posted mixed results. Revenue of $79.3 million fell short of analysts’ expectations of $94.86 million. However, a significant increase was observed in Bitcoin Mining revenue, which exceeded the Bitcoin Mining cost of revenue for the same quarter, amounting to $33.5 million, growing $7.4 million year-over-year. This surge can be attributed to higher Bitcoin prices during the quarter and an expansion in Bitcoin mining capacity at the Rockdale Facility.
The quarter’s net income was a robust $211.8 million, an exponential rise from the $18.5 million earned in the same period in 2023. This income included a change in Bitcoin’s fair value of $234.1 million. The quarter also saw the company generate non-GAAP adjusted EBITDA of $245.7 million, compared to $81.7 million in the first quarter of 2023. Earnings per share (EPS) of $0.82 significantly exceeded consensus expectations of -$0.14.
Moreover, in the first three months of 2024, sales of 26,169,300 shares of the company’s common stock resulted in net proceeds of approximately $345.7 million under its at-the-market equity offering program. This was followed by additional sales of 14,789,000 shares between April 1st and 30th, which generated roughly $154.1 million in net proceeds.
What Is the Price Target for RIOT Stock?
The stock has been highly volatile, with a beta of 3.01, and subject to quick spikes and drops in value. After a tumultuous ride over the past year, the stock is down roughly 47% and trades toward the bottom of its 52-week price range of $7.80 – $20.27. However, it has been on a positive run for the past 90 days and demonstrates shifting price momentum, trading above its 20-day (9.62) moving average. It appears to be trading at a relative discount, with a P/E ratio of 11.27x, comparing favorably to the Capital Markets industry average of 18.36x.
Analysts following the company have been bullish on the stock. For instance, Roth MKM analyst Darren Aftahi recently reiterated a Buy rating on the shares with a price target of $20. He noted the company’s recent operational advancements and the significant increase in hash rate.
Riot Platforms is rated a Strong Buy overall, based on eight analysts’ recommendations and price targets recently issued. The average price target for RIOT stock is $17.50, representing a potential upside of 78.48% from current levels.
RIOT in Summary
Riot appears primed for growth, owing to the rising Bitcoin prices and a robust action plan aimed at escalating hash rate capacity. With the recent launch of its Corsicana Facility, the world’s largest dedicated Bitcoin mining location, RIOT is set on tripling its self-mining hash rate capacity by year-end. Despite a revenue shortfall, the company’s first-quarter financials showed a significant rise in Bitcoin Mining revenue and a substantial net income increase. The company is well-positioned to tap into the market’s potential and could yield significant returns, offering investors a high-risk but enticing opportunity.
