Riot Platforms, Inc. RIOT has witnessed a 52.7% decline in its stock year to date, contrasting sharply with the 25.1% growth in its industry and the 19.6% increase in the Zacks S&P 500 composite.
This downturn mimics the performance of other cryptocurrency-focused stocks, such as Cipher Mining CIFR (down 27.6%) and Marathon Digital MARA (fallen 31.6%) in the same period.
Assessing Year-to-Date Performance
Image Source: Zacks Investment Research
The stock recently closed at $7.33, hovering near its 52-week low of $6.36, and is trading below its 50-day moving average, signaling bearish investor sentiment.
With RIOT shares displaying continued weakness, potential investors may ponder the optimal timing to enter. Let’s delve deeper.
RIOT’s Challenges Post-Halving and Financial Struggles
One pivotal reason for RIOT’s downward trend is the Bitcoin BTC/USD halving event, which has notably heightened operational hurdles for miners, including Riot. The halving necessitates each ASIC miner to work twice as hard to mine the same Bitcoin quantity, without the anticipated price surge for Bitcoin materializing to offset this elevated difficulty. Riot’s Bitcoin production fell 13% sequentially in August 2024, illuminating operational inefficiencies and intensified challenges stemming from the halving.
The production decline underscores broader issues Riot faces in its mining operations. In Q2 of 2024, the company mined 844 Bitcoins, a 52% drop year over year. This slump primarily attributes to a substantial uptick in Bitcoin network difficulty since January 2023. These operational obstacles place the company in a perilous financial position, potentially leading to further shareholder dilution as it pursues funding, translating to additional losses for investors.
Estimate Decline for RIOT
Four 2024 estimates shifted downward over the last 60 days, against no upward revisions. Meanwhile, the Zacks Consensus Estimate for 2024 earnings plummeted by 75.9%. This indicates analysts’ lack of confidence in the company’s near-future financial improvement.
Investing in RIOT Appears Risky
While some may be enticed to buy at discounted levels, ongoing operational hurdles at Riot and the downward revisions in analysts’ 2024 earnings estimates signify uncertainty.
Given RIOT’s substantial YTD decline and the significant challenges post the Bitcoin halving, a “Hold” recommendation seems judicious for now. The post-halving landscape has increased mining difficulty, seen in Riot’s reduced Bitcoin production in August 2024, a reflection of operational inefficiencies. Moreover, the sharp drop in Bitcoin mined in Q2 2024 and the notable rise in Bitcoin network difficulty highlight heightened financial risks for the company.
It would be prudent for investors to await further developments and assess Riot’s ability to surmount its post-halving obstructions before making any investment moves.
RIOT currently holds a Zacks Rank #3 (Hold).
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