RIOT stock is a buy, ATB Capital says

Looking for a crypto stock with leverage? Look no further than RIOT Platforms (RIOT Platforms Stock Quote, Chart, News, Analysts, Financials NASDAQ:RIOT), says ATB Capital analyst Martin Toner.

In a research report to clients March 31, Toner initiated coverage of RIOT with an “Outperform” rating and price target of $20.00, implying a return of 63.4 per cent at the time of publication.

Toner says RIOT is a company suited to what appears to be crypto’s second go with the public markets.

“We believe long-term, BTC will consolidate around low-cost operators with scale,” the analyst wrote. “Last year, RIOT’s cost to mine was $7,540/BTC thanks to ~$7,000/BTC in curtailment credits and it is operating the largest mine in the world. We believe RIOT has unique capabilities in mine development, power management, and relationships with suppliers. We believe that RIOT, in this BTC cycle, offers lower operational risk, and more certain growth in an environment with rising prices. Given the setup, we believe miners have considerable leverage to the price of BTC and RIOT’s low cost of power, access to growth, and clean balance sheet make it attractive.”

Toner thinks RIOT will post Adjusted EBITDA of $212.6-million on revenue of $465.4-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $505.8-million on a topline of $1.01-billion in fiscal 2025.

“RIOT has an ambitious growth plan that is well-funded with a highly liquid balance sheet, deposits, and a $750mm ATM. Importantly, RIOT has secured sufficient equipment to de-risk the plan. RIOT’s efficiency is the lowest of the group, due to the nature of its fleet, and lost production from the DCH business,” the analyst added. “As RIOT replaces the hot, inefficient part of the fleet with new miners and increases the percentage of immersion miners in the fleet, the mines become quieter, BTC/EH goes up, and margins get better.”