Riot Platforms(NASDAQ:RIOT) Scaling Heights of Bitcoin Mining

Roth MKM recently retained its Buy recommendation for Riot Platforms (NASDAQ:RIOT), a renowned Bitcoin miner whose stock has surged by an impressive 300% so far this year. The attention drawn by Riot Platforms is grounded in a strong rally in Bitcoin prices and an overall upswing in sentiment towards the broader cryptocurrency sector.

On July 7, 2023, the average one-year price target for Riot Platforms was projected to be $12.70, suggesting a potential decrease of 17.93% from its last reported closing price of $15.48. Projections estimate Riot's annual revenue at $424 million, marking a 67.82% increase. Despite the predicted non-GAAP EPS at -0.08, the institutional sentiment seems quite bullish towards Riot Platforms.

There are currently 375 funds or institutions reporting positions in Riot Platforms, albeit witnessing a decrease of 19 owner(s) or 4.82% in the last quarter. However, the average portfolio weight of all funds devoted to Riot Platforms has significantly increased by 96.94% to 0.34%. Institutional share ownership saw an uptick of 15.64% over the last quarter, increasing to 78,446K shares. Key institutional shareholders include VTSMX - Vanguard Total Stock Market Index Fund Investor Shares and NAESX - Vanguard Small-Cap Index Fund Investor Shares, both reporting an increase in portfolio allocation by 176.74% and 187.90%, respectively.

Recent weeks have seen Riot Platforms and its fellow Bitcoin miner, Marathon Digital, rise by 32.8% and 13.4%, even amid less than stellar Bitcoin production numbers for June and a slight decline in Bitcoin prices.

Just a couple of days ago, Riot Platforms announced an impactful deal. The company placed a $163 million purchase order for 33,280 new mining machines via a partnership with MicroBT Electronics Technology Co., Ltd. This deal is predicted to almost double Riot's deployed hash rate capacity from 10.5 EH/s to an estimated 20.1 EH/s by mid-2024.

June saw Riot Platforms mine 460 bitcoins (BTC-USD), down by 32% from the 676 tokens produced in May. However, this was a 9% increase from the 421 tokens mined in the same period last year. During June, Riot sold 400 bitcoins (BTC-USD) for net proceeds of $10.6M.

Riot's exciting partnership with MicroBT includes the procurement of the latest "Whatsminer M56S+ and M56S++" models of ASIC Bitcoin mining machines. This will enable Riot to nearly double its currently deployed hash rate capacity by mid-2024. The company also maintains the option to purchase an additional 66,560 miners by the end of next year. If executed, this could potentially raise the hash rate to a total of 35.4 EH/s.

The new set of MicroBT miners is a critical component of Riot's vision to establish itself as "the world’s leading Bitcoin-powered infrastructure platform." These miners will be manufactured in the United States for deployment at the Riot Corsicana, Texas facility, which is currently under construction. Riot’s existing site in Rockdale, Texas, is already the largest Bitcoin mining facility globally.

Comparatively, Marathon Digital Holdings, Inc. last announced an "operational hash-rate" of 15.2 EH/s and 20.1 EH/s installed capacity, including currently offline machines. Meanwhile, Core Scientific, Inc. reported 14.9 EH/s of self-mining capacity for its data center customers and upwards of 22.1 EH/s, including colocation-hosted services.

The upcoming Bitcoin halving, expected by May 2024, will reduce the network reward from the current $6.25 level to $3.125 per block. This indicates that the number of bitcoins that can be mined in one year will be cut in half, subsequently limiting the earning potential for all miners. However, the overall outlook remains bullish for Riot, underpinned by the broader Bitcoin boom, and the direction of regulatory efforts towards cryptocurrency, which could potentially further legitimize Bitcoin's status and stimulate institutional interest and global acceptance.

That said, the company does face risks, with the price of Bitcoin being a key point of concern. If macro conditions were to worsen, including higher financial market volatility, Bitcoin prices could come under pressure. Nonetheless, Riot is well-poised for future growth and remains a leader in its segment, largely thanks to its expanding scale and vertically integrated business model encompassing digital infrastructure and mining hosting services.
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