Bear of the Day: Riot Platforms (RIOT)
Riot Platform's (RIOT) is a Zacks Rank #5 (Strong Sell) that is a Bitcoin mining and digital infrastructure company based in the United States. The company's primary business is mining Bitcoin using specialized hardware and large-scale data centers that consume high amounts of electricity.
Despite Bitcoin moving to all-time highs, Riot has struggled to gain any traction. The company has missed on earnings three of the last four quarters and the stock has traded sideways since 2022.
About the Company
Riot owns and operates one of the largest Bitcoin mining facilities in North America, located in Rockdale, Texas. It focuses on vertically integrated operations, which means it manages key parts of the mining process in-house, including power procurement, facility development, and miner deployment.
The stock holds Zacks Style Scores of 'F' in Growth, Momentum, and Value. The company is valued at $3.6B and pays no dividend.
Q1 Earnings
Riot Platforms reported an EPS miss of 260%, but saw revenue of $161.4 million, narrowly topping expectations.
Results were weighed down by a $271 million mark-to-market Bitcoin loss, leading to a net loss of $296 million and adjusted EBITDA of -$178.4 million, compared to a strong profit a year ago.
Riot made strategic progress including the acquisition of Rhodium's Rockdale assets, which ended costly litigation and unlocked 125 MW of new mining power. The company's self-mining hash rate rose 7% quarter over quarter, with average uptime nearing 90%. Riot also continues to push forward on its AI and high-performance computing (HPC) data center strategy, with site expansions and infrastructure upgrades underway at its Corsicana facility.
Riot's Bitcoin holdings increased to over 19,000 BTC, valued at $1.6 billion.
Earnings Estimates Falling
While there was some positive news on the call, the bottom line is not giving investors what they want. And with that, analysts are dropping their earnings estimates.
For the current quarter, numbers have dropped 36% over the last three months, from -$0.19 to -$0.26.
Looking at the current year, estimates have dropped drastically, going from -$0.68 to -$1.53.
For the next year, numbers continue to fall deep into the red, now at -$1.00, down from -$0.63.
Technical Take
When you zoom out on the RIOT chart, you see a stock that has mostly flatlines, with some spikes higher due to excitement surrounding the upward trajectory of Bitcoin.
However, over the last two years, Bitcoin has seen a move from $30k to $112k, while RIOT is trading at the same level around $10 a share. This is a bad relative strength signal that suggests larger problems in the fundamental world.
The danger here for Riot investors would be a drop of Bitcoin price. This could impact RIOT in a major way and take the stock back down to the 2025 lows around $6.
In Summary
Despite record Bitcoin prices, Riot Platforms continues to disappoint investors with widening losses and declining earnings estimates. The company's operational improvements and ambitious AI data center plans have yet to translate into financial strength or stock momentum.
With shares lagging Bitcoin badly and estimates trending deeper into the red, Riot presents more risk than reward in the current environment. Until profitability improves and relative strength returns, this remains a name to avoid.
For those interested in the Bitcoin space, a better option might be MicroStrategy (MSTR). The stock is a Zacks Rank #3 (Hold) that is better correlated to Bitcoin.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
Free: See Our Top Stock And 4 Runners Up
Riot Platforms, Inc. (RIOT): Free Stock Analysis Report
MicroStrategy Incorporated (MSTR): Free Stock Analysis Report
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