RIOT is the best crypto stock, Roth says

After attending the company’s analyst day, Roth MKM analyst Darren Aftahi is bullish on Riot Platforms (Riot Platforms Stock Quote, Chart, News, Analysts, Financials NYSE:RIOT).

“We recently attended RIOT’s Analyst Day in New York. The discussions focused on RIOT’s growth plans and power strategy, highlighted by the first batch of miners becoming energized and hashing at Corsicana,” he said. “We maintain
the belief that RIOT’s transition from a stagnant hash rate to a projected 31.5 EH/s by year-end should help RIOT begin to regain favor among BTC miner peers. Its $1.3B in liquidity plus BTC production is ample to cover the cost of
its buildout through 2025.”

In a research update to clients April 22, Aftahi maintained his “Buy” rating and price target of $25.50 on RIOT.

The analyst thinks the company will post EBITDA of $54.7-million on revenue of $391.5-million in fiscal 2024. In fiscal 2025, he expects those numbers to improve to EBITDA of $144.5-million on a topline of $516.4-million.

Aftahi explained why he likes RIOT as an investment right now.

“Following the halving, we believe RIOT is one of a few miners that has a line of sight to a significantly higher hash rate in the next 6-12 months,” he wrote. “Its balance sheet acts as a barrier to entry to most with ~$1.3B of cash and BTC as of the end of March. We believe both the stock and fundamental setup are there. First, it disclosed its average operational hash rate in March was 8.6 EH/s. At its Analyst Day, it disclosed Rockdale’s average uptime was around 70%, with expectations Corsicana could be better. We believe XP performance has plagued the industry in Texas, with RIOT not being immune. We believe 70% should be a higher number at both Rockdale and Corsicana. With its first building now partially energized at Corsicana, we believe RIOT should see material growth in hash rate (something that has not occurred for a while) going forward. With it, its stock should see a revaluation in our view from the ~$44M/EH/s relative to average peers at ~$62M/EH/s. However, we believe its true peers are larger miners with aggregate self-mining hash rate north of 15 EH/s (CleanSpark (CLSK-NC) at 17 EH/s and Marathon Digital (MARA-NC) at 27.8 EH/s currently) which trade well over $100M/EH/s (~$113M EH/s average). That average valuation is more than 2.5x RIOT’s currently. As such, we believe if RIOT can 1) replace underperforming machines in Rockdale and 2) fully energize both buildings #1 and #2, the stock could see material upside from here, as that would theoretically put RIOT’s aggregate operating hash rate closer to 19.8 EH/s, relative to 8.6 today. We like risk/reward quite a bit here near $9. Lastly, there are no other miners that have access to a 1GW site that it can fully scale with the necessary capital.”