Bitcoin Mining Boom: Riot Platforms to Weather the Storm as Analyst Sees Silver Lining in Revenue Growth

  • Needham analyst John Todaro reiterated a Buy rating on Riot Platforms, Inc RIOT and lowered the price target from $15 to $13.
  • RIOT reported Q1 FY23 results after the Wednesday close, missing results on top and bottom line estimates, driven by an overhang from its data-center segment, which saw costs rise 46% QoQ. 
  • The cost increase was associated with operational expenses after the winter storm and higher property & casualty insurance. 
  • Additionally, RIOT is engaged in litigation with three companies tied to the Whinestone acquisition. 
  • RIOT currently hosts two of three hosting contracts inherited from the Whinestone acquisition. 
  • Given the sizeable negative margin from the hosting business, it is in RIOT's best interest to utilize the 100MW+ site for its self-mining, probably the crux of the litigation.
  • RIOT's self-mining business came in as Todaro expected but with modestly better costs. Additionally, he noted an anticipated bump in self-mining mining revenue in Q2 resulting from higher transaction fees, which has increased daily mining revenue across the Bitcoin network. 
  • He believes broadening use cases for Bitcoin support higher daily Bitcoin mining revenue, which helps de-risk the halving as mining revenue can now increase beyond the Coinbase Global, Inc COIN reward (which declines by 50% every halving).
  • Price Actions: RIOT shares traded lower by 14.40% at $10.52 on the last check Thursday.
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