Ark Invest CEO Cathie Wood has reiterated her long-term price target of $500,000 for Bitcoin. This might be optimistic. However, there is no doubt that Bitcoin adoption has been increasing, with participation from individual and institutional investors.
In the unregulated space, having a cryptocurrency portfolio might seem like a good idea. At the same time, there are listed companies that provide proxy-exposure to the world of cryptocurrencies.
Riot Blockchain (RIOT) is a Bitcoin miner, and one of the more interesting names among cryptocurrency stocks. RIOT stock has been trending lower in the last six-months, with a correction of 47.6%. However, the stock has still soared by 863% over the past 12 months. (See RIOT stock charts on TipRanks)
After some big movement and volatility, RIOT stock finally seems to be in a consolidation range. I am bullish on Riot Blockchain, with the company positioned for strong growth in the coming years.
Strong Quarterly Numbers
Supported by accelerated mining activity, Riot reported healthy numbers in Q2 2021. The company’s mining revenue increased by 1,540% to $31.5 million. For the same period, the company’s mining revenue margin was 70%, as compared to 25% in the prior year period.
It’s also worth noting that as of Q2 2021, the company reported cash and Bitcoin holdings of $195.4 million. This provides the company with ample financial headroom to pursue aggressive expansion.
Best Part of Growth to Come
For Riot Blockchain, the best part of revenue and cash flow growth is still to come. To put things into perspective, Riot mined 491 Bitcoins in Q1 2021. In the last quarter, the number of Bitcoins mined increased to 675.
Further, Riot mined 441 Bitcoins in August, with a hash rate capacity of 2.2 exahash per second (EH/s). Mining activity has therefore been increasing at a robust pace, and this is likely to translate into higher revenue and cash flows.
Another important point to note is that Riot is targeting hashing capacity of 7.7 EH/s by Q4 2022, which would translate to mining, 1,544 Bitcoins on a monthly basis by Q4 2022.
Assuming that Bitcoin trades at $50,000, the company is positioned to deliver monthly revenues of $77.2 million by Q4 2022. This would further imply an annualized revenue potential in the range of $900 million to $1 billion.
It also seems very likely that Riot will continue to pursue further expansion. As the hashing capacity increases, the company’s Bitcoin holdings will also swell. This can be utilized for expansion or diversification projects.
In May 2021, Riot announced the acquisition of Whinstone US. The latter is the owner of North America’s largest Bitcoin mining and hosting facility.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, RIOT stock comes in as a Strong Buy, with four Buys assigned in the past three months.
The average RIOT price target is $47.75 per share, implying 63.7% upside potential from current levels.
The cryptocurrency market can be likened to the early stages of the technology boom. It therefore makes sense to consider some exposure to this high-growth asset class.
Riot Blockchain seems attractive, with the company likely to grow at a stellar pace in the coming quarters.
Importantly, the increase in financial flexibility will allow Riot Blockchain to spread its wings within the world of cryptocurrencies.
Disclosure: At the time of publication, Faisal Humayun did not have a position in any of the securities mentioned in this article.
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