On Friday, B.Riley adjusted its outlook on Riot Platforms (NASDAQ:RIOT) shares, reducing the price target to $16 from $17, while maintaining a Buy rating on the stock. The firm's decision follows Riot's report of a marginal month-over-month increase in Bitcoin (BTC) production, which rose to 442 BTC for the month, including 17 BTC-to-Power equivalent.
Riot's average operational hash rate in March was reported to be relatively stable at 8.6 exahashes per second (EH/s), compared to 8.5 EH/s in February. This consistency in hash rate contributed to a flat production profile, despite Riot receiving $0.8 million in demand response credits and $0.5 million in power credits, amounting to roughly 17 BTC. The company's utilization rate remained unchanged month-over-month at 73%.
The company's 400 MW substation in Corsicana is slated to be operational in the first half of April 2024, marking a slight delay of approximately two weeks from the original schedule. Following the substation's energization, Riot plans to immediately begin operations at the first 100 MW building, A1. Concurrently, construction has commenced on the second 100 MW building, A2, with plans to install immersion systems in April and start operations later in Q2 2024.
Riot has committed substantial capital to its infrastructure, with phase 1 and phase 2 investments totaling $501 million, of which $176 million is allocated for phase 1. The company intends to deploy an initial order of 33,280 MicroBT miners at Corsicana post-completion of building A1 in the latter part of April. Additionally, Riot has placed a third order with MicroBT for 31,500 air-cooled miners for its Rockdale facility, aiming to replace approximately 17,000 older machines.
The company's operational targets include reaching a hash rate of 20.1 EH/s by mid-2024 and 38.1 EH/s in 2025 after installing a second order of 66,560 miners, which are expected to be fully delivered by April 2025. Riot anticipates achieving a total hash rate of 41 EH/s following the deployment of the third order in 2025.
B.Riley has revised its estimates for Riot's Q1 and full-year 2024 adjusted EBITDA from $39.0 million to $32.7 million and from $223.2 million to $216.9 million, respectively. The adjustment in price target to $16 is primarily attributed to the lower-than-expected BTC production in Q1 2024 and the delayed start of operations at building A1 in Corsicana.
InvestingPro Insights
As Riot Platforms (NASDAQ:RIOT) navigates the dynamic cryptocurrency mining landscape, current real-time data from InvestingPro provides a snapshot of the company's financial health and market performance. With a market capitalization of $2.58 billion and a notably high negative P/E ratio of -35.94, reflecting the challenges in turning a profit, Riot holds a price to book ratio of 1.37, suggesting that the stock may be reasonably valued in terms of its assets. Despite a modest revenue growth of 8.3% over the last twelve months as of Q1 2023, the company's gross profit margin remains low at 9.39%, highlighting the cost pressures it faces.
InvestingPro Tips also shed light on Riot's financial strategy and analysts' expectations. The company holds more cash than debt, indicating a level of financial flexibility. Analysts are anticipating sales growth in the current year, which could be a positive signal for investors. However, concerns are evident with a quick cash burn and expectations of net income dropping this year. Additionally, with the stock experiencing significant volatility and price declines over recent months, investors should consider the inherent risks associated with such fluctuations.
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