Riot Blockchain Stock Is a Buy for Bullish Investors as Bitcoin Prices Surge
By Mohit Oberoi, CFAJan. 29 2021, Published 9:41 a.m. ET
Cryptocurrencies have skyrocketed over the last year. Bitcoin prices rose almost 320 percent during this period. Investors' rising appetite for cryptocurrencies and digital currencies is also fueling a rally in stocks of bitcoin mining companies. There has been a rally in some of the bitcoin stocks like Riot Blockchain (RIOT). Is RIOT a good blockchain stock to buy?
RIOT stock gained 11 percent on Jan. 28. The stock was trading more than 20 percent higher in pre-market trading on Jan. 29. The stock has risen more than 1,500 percent over the last year, which far exceeds the returns from bitcoin.
Riot Blockchain focuses on bitcoin mining
Riot Blockchain is a bitcoin mining company that intends to be among the lowest cost and largest bitcoin miners in North America. It's already among the largest publicly traded bitcoin mining companies in North America.
The company reported revenues of only $2.46 million in the third quarter of 2020, which was similar to what it posted in the same quarter in 2019. However, Riot Blockchain posted a net loss of $1.72 million in the third quarter of 2020.
RIOT stock on Stocktwits
Most Stocktwits users are bullish on RIOT stock. One user by the name D_HSwing expects the stock to hit $30 on Jan. 29. Another user that goes by the name sebe88 expects RIOT stock to rise to its all-time highs on Jan. 29 pointing to a rise in bitcoin prices.
Elon Musk on bitcoin
Bitcoin prices are surging on Jan. 29. Tesla CEO Elon Musk, whose tweet led to a spike in Signal stock (albeit the wrong one), has tagged bitcoin in his Twitter bio. Musk’s tweets have a market-moving impact because his followers jump to buy the stocks that he tweets about. Musk's tweet might also have helped add fuel to the rally in GameStop (GME) stock.
Chamath Palihapitiya also tweeted that he's buying $115 calls on GameStop. Meanwhile, Robinhood placed restrictions on trading on some stocks like GME on Jan. 28 amid the sharp volatility. The rise in GME stock is behind fueled by a Reddit group WallStreetBets. The stock fell sharply on the news. However, GameStop is trading higher in the pre-market on Jan. 29.
Is RIOT stock a buy?
It's tough to build a case for buying RIOT stock only based on the current earnings. For example, the stock trades at an NTM price-to-sales multiple of 31x. However, the growing popularity and rising prices of bitcoin are trickling down to bitcoin miners.
Bitcoin miners like RIOT could also see splendid growth in the years ahead as the demand for crypto miners grows. If you are bullish on cryptocurrencies and blockchain, you can consider RIOT stock as a small part of your portfolio.
