Riot Blockchain (RIOT) sags on inflation concerns
By Robert Davis
18:17, 17 November 2021
Riot Blockchain shares extended their slide Wednesday after the cryptocurrency mining company issued an underwhelming third quarter earnings report late Monday night.
The stock dropped 12% Tuesday following the earnings release and was down more than 2% at 19:00 UTC.
The Castle Rock, Colorado-based company reported revenue of $64.8m (£48.2m) for the three months ended 30 September compared to the $2.5m figure the company brought in last year.
However, Riot Blockchain still produced a net loss of $15.3m compared to the $1.7m it lost last year. The losses were “significantly impacted” by $36m in non-cash stock-based compensation expenses and an unrealised loss of $11.2m in equity securities, the company said.
Riot also reported an earnings per share loss of $0.16, compared to a $0.04 loss in the prior year quarter.
For comparison, five analysts surveyed by Yahoo Finance expected the company to report revenue of $68m and an EPS gain of $0.35.
Adjusted EBITDA was $37.6m compared to negative $398k in the prior year quarter.
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‘Moody’ crypto market
One reason analysts at Coinbase point to for Riot’s recent performance is that the overall cryptocurrency market has been “moody” lately because of inflation.
At 15:00 UTC, the crypto market was mostly down with popular assets like Solana and Terra down 4.56% and 2.89%, respectively.
While bitcoin (BTC) and other cryptocurrencies are still seen as a hedge against inflation, analysts at Coinbase said “investors may have taken advantage of high prices to secure profits, and some may be seeking more certainty around crypto regulation.”
“It’s important to remember that inflation doesn’t automatically signal ‘endless gains’ to every BTC trader — and the prospect of higher interest rates has the potential to spook markets of all kinds, including crypto,” the company wrote in a blog post.
Inflation also seems to be impacting other crypto mining companies such as HIVE Blockchain Technologies and Stronghold Digital Mining, both of which are down 3% and 8% over the last week, respectively.
The future success of Riot seems to hinge on its ability to increase its hash rate. The company said in its Q3 earnings statement that it expects to have a hash rate of 8.6 EH/s, without calculating for incremental productivity gains, by the end of next year.
Hash rate measures the speed at which cryptocurrency miners operate. Therefore, Riot would be able to produce more assets to help offset its stock-based compensation expenses.
The company was able to increase its deployed hash rate capacity in Q3 to 2.6 EH/s from 1.6 last year while also making substantial progress toward completing two mega-power stations.
Riot currently employs more than 27,000 miners with another 11,500 units of mining equipment on order, the third quarter earnings say.
Analysts seem optimistic that Riot will be able to overcome its inflationary pressures and produce higher revenue and EPS totals looking ahead to the fourth quarter and the rest of the fiscal year.
Five analysts surveyed by Yahoo Finance expect the company to report EPS of $0.41 and revenues nearing $99m in Q4.
For the full year, Riot is expected to produce EPS gains of $0.98 and revenue of $225.2m.
Read more: Riot Blockchain reports massive Q2 gains
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