The Pullback in Riot Blockchain Is a Stellar Buying Opportunity
Cryptocurrency miners, like Riot Blockchain (NASDAQ:RIOT) have been explosive.
After starting the year at a low of $15.85, shares of RIOT blasted to a high of $79.50. All as it rallied along with Bitcoin (CCC:BTC-USD). After all, the higher BTC moves, the higher RIOT moves. We’ve seen the same thing happen with Marathon Digital (NASDAQ:MARA).
Sure, Bitcoin and mining stocks — like Riot Blockchain — have pulled back in recent weeks. However, it appears the pullbacks are overdone.
In fact, at current prices, I’d use weakness in both as an opportunity, especially as they start to pivot from oversold conditions. Look at Bitcoin, for example. Over the last few weeks, the digital currency dropped from triple top resistance around $65,000 on Nov. 14 to around $48,300 on Dec. 10.
Not only is BTC holding support at its 200-day moving average, it’s now greatly oversold on relative strength index (RSI), moving average convergence difference (MACD), and Williams’ %R. In fact, if you pull up a two-year chart of BTC, you can see that each time these indicators align in oversold territory, it bounces shortly after.
Once BTC pushes higher, miners like RIOT are sure to follow. Near-term, I’d like to see RIOT challenge prior resistance around $46.28, and then perhaps $79.50 highs.
RIOT Stock: a Top Miner to Buy and Hold, Long-Term
While you can always trade digital currencies, it’s not for everyone. But if you still want exposure to the world of Bitcoin, you can always invest in the miners like Riot Blockchain, who track the movements of Bitcoin.
Consider this: at the moment, BTC trades at around $48,300. However, according to CoinList CEO Graham Jenkin, as noted by CNBC contributor Nathasha Turak, Bitcoin could see $100,000 by the beginning of 2022. With that date just weeks away, I’m not so sure BTC will reach it. Perhaps by late 2022, though.
Even big financial institutions are bullish. JP Morgan (NYSE:JPM) says Bitcoin could eventually test $146,000. Bloomberg says BTC could run to $400,000 in 2022, according to the April 2021 Bloomberg Crypto Outlook.
Bitcoin adoption could push the digital currency even higher, with Visa (NYSE:V) launching cryptocurrency consulting services.
Any one of those bullish scenarios could see Bitcoin and miners, like RIOT, explode higher.
RIOT Earnings Growth is Just as Impressive
In the third quarter, Riot Blockchain’s total revenue skyrocketed 2,532% to $64.8 million from $2.5 million year-over-year. Mining revenue soared 2,099% to $53.6 million from $2.4 million year-over-year. Mining revenue margins were up to 76% from 47%.
RIOT also increased BTC production by 482% to 1,292 BTC in the quarter from 222 year-over-year. In addition, RIOT reported $37.6 million in adjusted EBITDA in the quarter from a net loss of $400,000 year-over-year, as well.
What’s not to like?
In a November update, the company produced another 466 BTC, a 298% jump year-over-year. Year-to-date, the company has now produced 3,387 BTC, a 262% jump year-over-year.
Analysts seem to like the RIOT stock, with Roth Capital analyst Darren Aftahi initiating a buy rating with a $55 price target.
As noted by TheFly.com, “Aftahi views Riot as ‘an equity-based way to gain exposure to the quickly expanding Bitcoin mining and infrastructure market,’ adding that its acquisition of Whinstone is ‘a game-changer’ since it enables the company to nearly double its capacity by the end of FY22.”
The Bottom Line on Riot Blockchain
I’d use recent weakness in the RIOT stock as an opportunity. With Bitcoin prices set to rocket well above $100,000 at some point, RIOT is sure to follow.
In addition, earnings should remain impressive. With massive 2,532% growth in total revenues, and a 2,099% jump in mining revenues so far, I don’t see much standing in the way of higher highs for the RIOT stock.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.