Needham analyst John Todaro has maintained a bullish view on Riot Platforms (NASDAQ:RIOT) stock despite temporary challenges. Having said that, Todaro cut the price target on RIOT stock to $15 (39.3% upside) from $17 following a downward revision in Fiscal 2024 revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) estimates. The five-star analyst cited a higher network hash rate, lower contribution from Engineering, and higher floor for general and administration expenses per quarter for the revised estimates.
Riot Platforms operates in multiple facets of the cryptocurrency space, including Bitcoin (BTC-USD) self-mining, hosting data centers for miners, and manufacturing electrical components and immersion-cooling technology for mining.
Riot Platform’s Mixed Q1 Results
For the three months ending March 31, 2024, Riot Platforms posted diluted earnings per share (EPS) of $0.82, the highest profit to date. Moreover, the company’s bottom line significantly outpaced the consensus of a diluted loss per share of $0.20.
Total revenue rose 8.3% year-over-year to $79.3 million but missed the consensus estimate. This was primarily due to a 131% jump in bitcoin prices, offset by lower bitcoin production. Importantly, Bitcoin Mining revenue surged 55.4% while Engineering revenue declined 70.8% compared to Q1 FY23.
By the end of Fiscal 2024, Riot aims to reach 31 exahash per second (EH/s) of total hash rate capacity. This will be possible by the expected full functioning of the upcoming Corsicana facility, which will host a total capacity of 1 GW when fully developed. Corsicana is expected to emerge as the world’s largest Bitcoin mining facility based on developed capacity.
Coming to the operational update for April, Riot produced 375 bitcoins, down 41% year-over-year and 12% lower on a sequential basis. It achieved a deployed hash rate of 12.6 EH/s, up 19% year-over-year and 1% higher compared to March 2023. As of April 30, Riot held 8,872 bitcoins.
Analyst Todaro’s Bullish Views on RIOT Stock
Analyst John Todaro ranks 347 among more than 8,800 analysts on TipRanks. With a success rate of 59%, Todaro has achieved an average return of 36.6%.
Todaro’s bull case for Riot rests on three premises. He estimates that Riot is one of the lowest-cost Bitcoin miners in the industry. Next, the analysts noted that Riot has a clean balance sheet, with zero corporate debt. It boasts one of the largest cash reserves among publicly traded mining peers and BTC holdings compared to rivals.
Lastly, Todaro says that Riot’s shares traded at a premium because the miner was able to deliver low-cost mining while executing its facility deployment targets without increasing leverage.
The analyst’s revised price target is based on 20x EV/EBITDA (enterprise value/EBITDA) of the FY24 estimate. His valuation reflects a potential increase in Bitcoin demand post the launch of ETFs (exchange-traded funds), high cash balance, zero debt, and an improved position for mergers compared to rivals. Todaro is also optimistic about the Corsicana facility coming live by the end of this year, which will enable a higher hash rate.
Is RIOT Stock a Buy or Sell?
Based on 10 unanimous Buy ratings, RIOT stock commands a Strong Buy consensus rating on TipRanks. The average Riot Platforms price target of $18.72 implies 73.8% upside potential from current levels. RIOT shares have lost 30.1% so far in 2024.
Key Takeaways
Needham analyst sees greater growth potential for Riot Platforms in the long run once it navigates the current challenges and the Corsicana facility becomes fully functional. Todaro is positive about Riot’s ability to increase Engineering revenue by mitigating supply issues by Q3 FY24. At the same time, he believes Riot will resolve the hosting issues, which will result in lower legal expenses and increase self-mining.
