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Shares of cryptocurrency miner Riot Blockchain (NASDAQ:RIOT) have been on a tear in the past 12-months. RIOT stock is up more than 3,600 in the past period.
Source: Mark Agnor / Shutterstock.com
It is coming off its most successful year in its business and investing heavily in its Bitcoin (CCC:BTC-USD) mining operations. Moreover, based on its production efficiency and favorable demand and supply dynamics, RIOT deserves a higher valuation.
The company capped off the year in style after hitting GAAP profitability in the fourth quarter last year. Mining revenues were up a massive 340% on a year-over-year basis to $5.2 million and 116% on a sequential basis.
At the same time, selling, general, and administrative costs increased by just 14% sequentially. This resulted in the company posting $3.9 million net income on a GAAP basis compared to a loss of $3.4 million in the same period last year.
The average Bitcoin price was $18,900, and newly mined Bitcoin rose 36% sequentially from 222 coins in the previous quarter.
More importantly, the hashing capacity shot up 460%, while the Bitcoin on the balance sheet rose by more than 100%. Hence, with the rising Bitcoin prices, strong fundamentals, and its capital investments, Riot could make an even bigger splash this year.
Bitmain Dealand RIOT Stock
One of the key problems from crypto miners relates to the shortage of semiconductors. The global shortage has impacted several industries, and chip producers prioritize the consumer electronics sector to the stability in demand.
Riot’s deal with Bitmain for 42,000 S19j Antminers will essentially remove these bottlenecks from the equation. Furthermore, the deal worth $138.5 million solidifies its hash rate growth trajectory for the next couple of years at least. Its hash rate is near 5 EH/s and should be at 7.7 EH/s by the conclusion of 2022.
The hash rate will accelerate with the rising demand and growing production of the rigs and chips. However, the growth will be offset by the electrical regulatory issues in China and seasonality troubles there.
Whinstone Purchase
Riot has its facility in Cointmint’s Massena, New York, where it hosts its 14,000 Bitmain Antminers. Just last year, it relocated its operations from Oklahoma City to Massena to lower production costs.
As a result, their energy utilization is currently at 43 megawatts at this time. Additionally, the company recently announced its plans to acquire Whinstone Rockdale to free itself from the constraints levied by Coinmint with regards to power and hosting.
Whinstone is currently the largest Bitcoin hosting facility in the U.S., with a deployed capacity of 300 megawatts (mw).
The details of the power purchase agreement are scant at this time but appear to be favorable based on the little information available. Moreover, Riot states that it’s essentially moving to a facility where “power costs are among the lowest in the industry.”
Whinstone currently has three institutional clients who are expected to utilize close to 300mw in aggregate energy supply. Additionally, Whinstone also generates revenues from hosting clients on-site, including deploying cooling technology for Bitcoin mining.
That is particularly important, as it fits in extremely well with Riot’s research and development into its immersive cooling technology.
One of the key benefits of cooling is that it increases the lifespan of the mining equipment, which is a major expense for mining companies such as Riot.
Final Word on Riot Stock
RIOT Stock is riding the crypto wave and has effectively built its resources to take full advantage of heightened investor sentiment.
It has invested heavily in its mining equipment and facility to lower its energy costs and increase its hash rate as much as possible. Moreover, it’s already hit GAAP profitability and will continue to increase revenues at an impressive pace. Therefore, RIOT stock is one of the best crypto investments out there.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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