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.

Overview Rating:

Speculative

0100

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