Riot Blockchain: Bitcoin Volatility Merits a Conservative Outlook

Bitcoin and its fellow cryptocurrencies have been hogging the headlines again following Wednesday’s deep plunge. Seasoned crypto investors are accustomed to such swoons, which are usually mirrored in the performance of Bitcoin-related stocks, such as miner Riot Blockchain (RIOT).

And just as Bitcoin surged in the year’s first quarter, so did Riot’s revenue streams. The company reported Q1 results earlier this week, with revenue reaching $23.2 million, a 342.1% uptick from the $5.2 million generated in the previous quarter.

While the figure just narrowly missed H.C. Wainwright analyst Kevin Dede’s $24.3 million estimate, the analyst sees plenty to be positive about.

“Bitcoin’s jump and Riot’s hash addition clearly marked the March quarter’s performance as the company’s largest historically, but the quarter’s news flow we believe speaks louder: continued rollout of new miners, installing 6,703 during the quarter for a quarter-end fleet total of 13,746 and roughly 1.3 EH/s, targeting 7.7 EH/s by more than 81,000 machines year-end next year,” Dede noted.

However, Dede thinks the most important development in the quarter concerns Riot’s agreement to acquire Texas-based Whinstone U.S., which will provide the company with a 100-acre facility with long-term access to 750 MW of power.

Dede thinks the deal could be consummated shortly and keeps the company on track to meet several “positive objectives.” Amongst them, taking control of mining operations instead of depending on a third-party host, improving its hash rate at a faster pace than the Bitcoin network hash rate and given Whinstone hosts other mining operations, diversifying its revenue stream, while at the same time, investing in infrastructure to support growth.

However, while long-term bullish, due to the drop in Bitcoin’s price and the recent volatility, Dede thinks it is prudent to keep a lid on expectations on the anticipated BTC price in the near-term. Accordingly, Dede dropped his FY21 revenue and EPS estimates from $205.3 million and $1.95 to $166.6 million and $0.85, respectively.

To this end, Dede slashed his price target from $64 to $30, while reiterating a Buy rating on RIOT stock. (To watch Dede’s track record, click here)

Currently, no one else on Wall Street appears to be following Riot’s trajectory and Dede’s is the lone analyst review on record. (See Riot Blockchain stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.