Riot Platforms, Inc. RIOT has seen its shares drop 52.7% so far this year, a stark contrast to the 25.1% growth seen in its industry and the 19.6% rise in the Zacks S&P 500 Composite Index.
This drop mirrors the performance of other cryptocurrency-focused stocks, such as Crypto mining CIFR27.6% less, and Digital Marathon MARAwhich has fallen by 31.6% during the same period.
Price performance year-to-date
Image source: Zacks Investment Research
The stock recently closed at $7.33, hovering around its 52-week low of $6.36, and is trading below its 50-day moving average, reflecting bearish investor sentiment.
As RIOT stock continues to show weakness, investors may be considering whether now is the right time to buy. Let’s take a deeper look into the topic.
RIOT's financial obstacles and difficulties after the halving
One of the main 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 twice as hard to mine the same amount of Bitcoin, but the anticipated price increase for Bitcoin has not occurred to offset this increased difficulty. Riot’s Bitcoin production decreased 13% sequentially in August 2024, highlighting the operational inefficiencies and increased challenges facing the company due to the halving.
The drop in production underscores the broader issues facing Riot in its mining operations. In Q2 2024, the company mined 844 bitcoins, a 52% year-over-year decrease. 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, which could lead to further share dilution as it seeks funding, resulting in additional losses for shareholders.
RIOT's estimates are falling
Four estimates for 2024 have been lowered in the past 60 days, versus no upward 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.
The IPO seems risky
While some investors may be tempted to buy at these low levels, the company's current operational difficulties, coupled with analysts' downward revisions to 2024 earnings estimates, indicate uncertainty.
Considering RIOT’s steep decline so far this year and the significant challenges it faces following the Bitcoin halving, a “hold” recommendation seems appropriate at this time. The post-halving environment has made mining difficult, and RIOT’s Bitcoin production dropped in August 2024, further reflecting operational inefficiencies. Moreover, with a sharp decline in Bitcoin mined in Q2 2024 and a notable increase in Bitcoin network difficulty, the company faces increased financial risks.
Investors should take a wait-and-watch approach to assess whether Riot can overcome its post-halving challenges before making further investment decisions.
RIOT currently has a Zacks Rank #3 (Hold).
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