Riot Platforms, Inc. RIOT has seen its stock plummet by a staggering 52.7% year-to-date, painting a bleak picture compared to the 25.1% growth in its industry and the 19.6% increase in the Zacks S&P 500 composite.
This downturn echoes the trend in other cryptocurrency-focused stocks like Cipher Mining CIFR, down 27.6%, and Marathon Digital MARA, experiencing a 31.6% fall during the same period.
The Story of Price Decline
Image Source: Zacks Investment Research
Closing recently at $7.33, near its 52-week low of $6.36, the stock lingers below its 50-day moving average, reflecting a somber sentiment among investors.
With RIOT shares in a downward spiral, investors are pondering whether the time is ripe to consider a purchase. Let’s delve deeper.
Upheaval Post-Halving and Financial Struggles
One of the main drivers behind RIOT’s downward trajectory is the Bitcoin BTC/USD halving event, intensifying operational hurdles for miners, like Riot. Following the halving, each ASIC miner must now toil twice as hard to mine the same amount of Bitcoin, yet the expected price surge for Bitcoin has failed to materialize to offset this increased difficulty. A 13% sequential drop in Riot’s Bitcoin production in August 2024 underscores the operational inefficiencies and escalated challenges consequent to the halving.
The decline in production sheds light on Riot’s broader mining predicaments. In the second quarter of 2024, the company mined 844 Bitcoins, marking a 52% year-over-year decrease. This slump is chiefly attributed to a significant spike in Bitcoin network difficulty since January 2023. These operational hurdles have placed the company in a precarious financial position, potentially triggering further share dilution in its quest for funding, translating into more losses for shareholders.
Downward Projections for RIOT
Four estimates for 2024 have moved southward in the past 60 days with no upward revisions. Moreover, the Zacks Consensus Estimate for 2024 earnings has plummeted by 75.9% during the same period. This signals a lack of faith among analysts in the company’s near-term prospects for financial recovery.
Caution Ahead: Is It Time to Buy?
While the tantalizingly low stock prices may beckon some investors, RIOT’s ongoing operational struggles, along with analysts’ downward revisions for 2024 earnings forecasts, spell uncertainty.
Considering RIOT’s substantial year-to-date decline and the formidable challenges post the Bitcoin halving, a “Hold” recommendation appears prudent for now. The post-halving landscape has heightened mining complexity, showcased by RIOT’s drop in Bitcoin production in August 2024, highlighting operational inefficiencies. Further, the sharp reduction in Bitcoin mining in the second quarter of 2024, coupled with the notable elevation in Bitcoin network difficulty, accentuates the company’s amplified financial risks.
Investors are advised to exercise caution and observe Riot’s ability to surmount its post-halving hurdles before committing to further investments.
RIOT currently holds a Zacks Rank #3 (Hold).
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