Riot Platforms Stock Plummets 53% YTD: Right Time to Buy?

Riot Platforms, Inc. RIOT has experienced a 52.7% decline in its stock year to date, a sharp contrast to the 25.1% growth seen in its industry and the 19.6% increase in the Zacks S&P 500 composite.

This downturn mirrors the performance of other cryptocurrency-focused stocks, such as Cipher Mining CIFR, down 27.6%, and Marathon Digital MARA, which has fallen 31.6% during the same period.

Year-to-Date Price Performance

Image Source: Zacks Investment Research

The stock recently closed at $7.33, hovering near its 52-week low of $6.36, and is trading below its 50-day moving average, reflecting bearish investor sentiment.

With RIOT shares continuing to show weakness, investors may be considering whether now is the right time to buy. Let's explore further.

RIOT's Post-Halving Obstacles and Financial Difficulties

One of the primary reasons for RIOT's downward trajectory is the Bitcoin BTC/USD halving event, which has significantly increased operational challenges for miners, including Riot. The halving means that each ASIC miner now needs to work double as hard to mine the same amount of Bitcoin, but the anticipated price increase for Bitcoin has not occurred to balance this increased difficulty. Riot's Bitcoin production decreased 13% sequentially in August 2024, highlighting the operational inefficiencies and increased challenges the company faces due to the halving.

The drop in production underscores the broader issues Riot is grappling with in its mining operations. In the second quarter of 2024, the company mined 844 Bitcoins, a 52% decrease year over year. This decline is primarily attributed to a significant increase in the Bitcoin network difficulty since January 2023. These operational challenges have put the company in a risky financial position, potentially leading to further share dilution as it seeks funding, which would result in additional losses for shareholders.

RIOT's Declining Estimates

Four estimates for 2024 moved south over the past 60 days versus no northward revisions. Over the same period, the Zacks Consensus Estimate for 2024 earnings has declined 75.9%. This indicates a lack of confidence among analysts in the company's ability to improve its financial performance soon.

Entry Into the Stock Seems Risky

While some investors may be tempted to buy at these low levels, the company's current operational struggles, coupled with analysts' downward revisions for 2024 earnings estimates, signal uncertainty.

Given RIOT's steep decline year to date and its significant challenges following the Bitcoin halving, a "Hold" recommendation seems appropriate at this time. The post-halving environment has made mining more difficult, and RIOT's Bitcoin production dropped in August 2024, further reflecting operational inefficiencies. Additionally, with a sharp decrease in Bitcoin mined in the second quarter of 2024 and a notable rise in Bitcoin network difficulty, the company faces heightened financial risks.

Investors should adopt a wait-and-watch approach to assess whether Riot can overcome its post-halving challenges before making further investment decisions.

RIOT currently carries a Zacks Rank #3 (Hold).

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