Is Riot Blockchain a Buy?

With cryptocurrency rising in popularity, interest in blockchain stocks has been building up momentum over the last month. NASDAQ-listed Riot Blockchain (RIOT) is one of the largest Bitcoin miners in the USA, and has seen a lot of share price volatility. The company is involved in large scale cryptocurrency mining, and It’s a resource heavy business costs a lot to maintain the computer servers needed.

Riot started the year with a share price of $16.50 and by February 17th, it hit a high of $77.8, a whopping 370% hike. However, when the price of Bitcoin dropped over the past two days, so did the price of RIOT, losing over 20% in a day. This is not dissimilar to Barrick Gold following Gold prices closely. Bitcoin has been skyrocketing as more and more institutional investors and large business’s join the party. However, fear has been building with Elon Musk tweeting that ‘the price does seem high’ recently, and that the price is based on speculation rather than good fundamentals.

Riot has a market cap of £1.3 billion, with negative earnings per share, and no dividend payout. During the first nine months of 2020, Riot generated $6.7m in revenue and produced a $17m loss. It made 730 Bitcoin with no profits, and it doesn’t seem to have a competitive edge over any of the other big miners across the globe. Investment has been good, but computers soon go out of date, and it can be hard to generate return on investment.

With the likes of Litecoin enjoying a new level of credibility and rising price, it’s quite possible these blockchain stocks will follow suit, and for day / medium term traders I an see the appeal. However if you‘re looking for a long term investment then there are far better stocks with less risks and more value in them.