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Riot Blockchain: Is the Expansion Plan Being Kept Under Wraps?

Investors did not react favorably to Riot Blockchain’s (RIOT) latest quarterly financials and last week sent shares down following the Q3 print.

However, while the company’s revenue haul also fell short of H.C. Wainwright’s Kevin Dede’s expectations, the analyst thinks the company’s growth prospects are sound.

The bitcoin miner delivered revenue of $64 million, missing the consensus estimate by $2.35 million, and coming in significantly below Dede’s expectation of $84.8 million.

However, Dede is not concerned by the gap between his estimate and the result, believing it was due to H.C. Wainwright “not adjusting estimates per monthly operational updates offered.” In fact, looking to FY22, the analyst believes his previous estimate was too conservative, and now expects revenue of $536 million up from the prior $450.7 million.

This is down to two main reasons; for one, Dede expects the average bitcoin price to be much higher, anticipating 1 BTC will be worth around $64,000 compared to his previous forecast of $50,000 apiece.

Secondly, the deployment of mining rigs at the Whinstone facility – an acquisition which closed toward the end of Q2 – is “accelerating,” and by 4Q22, is now anticipated to generate 8.6EH/s, up from 7.7EH/s currently. “Continued progress on the four-building site has new buildings set and foundations progressing where we expect seven buildings in total each powered by roughly 100MW,” Dede noted.

All Riot’s future miner deliveries will be housed in these buildings, and per Dede’s understanding, one of the new 100MW buildings will be home to ordered S19 Antminers boasting immersion-cooling technology which should up the hash rate from 3.0EH/s to 3.7-4.4EH/s.

And the analyst also believes the growth trajectory could get a further boost from an “extra-large” expansion plan which is being “downplayed,” and which Riot’s “employee incentive plan” may have given away.

“Buried in a mid-August 8-K filing,” said the 5-star analyst, “Riot’s incentive plan let a very large cat out of the bag in its intention to expand to 1.5GW—we understand the main ERCOT switch adjacent supports such a load. Few miners with which we are familiar have access to infrastructure and power at that scale, and by rough, back-of-the-envelop calculations, point to as much as 45EH/s in hash, or higher, depending on miner output improvements and immersion use.”

All in all, then, Dede reiterated a Buy rating on RIOT shares, backed by a $50 price target. If everything goes as planned, the stock will soar about 35% over the next 12 months. (To watch Dede’s track record, click here)

The rest of the Street agrees; all 4 other recent ratings are positive, culminating in a Strong Buy consensus rating. The forecast calls for 12-months gains of ~29%, given the average price target currently stands at $47.60. (See RIOT 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.