Riot: Crypto Price Slump Offers an Attractive Entry Point, Says Analyst

The jury is still out on whether the “crypto winter” is once again truly upon us. Nevertheless, the space has been going through a down cycle recently, with bitcoin dictating sentiment, as usual. Since its all-time high in November last year, the leading cryptocurrency has fallen 39%.

Meanwhile, as is customary, with the decline in BTC’s price, fortunes of those in the ecosystem have followed suit. Since mid November last year, the share price of bitcoin miner riot blockchain (riot) has fallen 55%.

The company has been seeing other macro elements hinder its performance in 4Q21. As such, mostly on account of “delays in adding hash” on a target of reaching roughly 3.9EH/s by the end of last year, H.C. Wainwright’s Kevin Dede now expects Q4 sales of $86.8 million compared to the prior estimate of $103.8 million.

“Certainly not unique to Riot,” says the analyst, “The pandemic and logistics issues have hampered deployments across the crypto sphere, and we understand that while Riot had access to all the gear required to reach its target deployment last year, labor inputs were curtailed.”

Although in the near-term, the delays will “hurt,” the analyst is especially intrigued by one announcement in the company’s December update. Assuming full deployment of approximately 120,150 Antminer rigs, the company’s new hash target for the end of 2022 stands at 12.8 EH/s.

Furthermore, the analyst believes Wall Street is missing an important element regarding the RIOT growth story. The company’s intention to expand its power capacity to 1.5GW has been kept fairly low key. As such, while Dede notes that “a flood of new sell-side research” has been pointing out the leaders of North American crypto mining, the analyst is “surprised that most everything we have seen continues to miss Riot's “real” target of 1.5GW, not 700MW.” While timing of the full deployment is “not specifically clear,” Dede estimates the company has set its sights on year-end 2023.

With all this to come, Dede thinks the crypto price drop “offers an entry point.”

“With Riot's share price off against the opportunity of 1.5GW of ERCOT grid power used in self and hosted mining bolstered by associated contractual power pricing discount perks,” the analyst summed up, “We see Riot defending its status as a North American bitcoin mining leader.”

Accordingly, Dede rates RIOT stock a Buy, and sticks to a $50 price target. The analyst, therefore, expects the stock to climb by 152% over the coming months. (To watch Dede’s track record, click here)

Dede might think his colleagues are overlooking certain RIOT aspects, but all agree on its prospects; based on Buys only - 5, in total – the stock has a Strong Buy consensus rating. Dede’s optimistic target is no outlier; going by the $47.75 average price target, shares will appreciate ~142% in the year ahead.