The cryptocurrency economy is growing at an impressive rate. China has been the market leader in crypto mining, but Beijing’s crackdown on cryptocurrency made crypto mining off-limits for investors. “The whole narrative of China controls bitcoin is now completely destroyed,” asserted Boaz Sobrado, a London-based fintech data analyst. This has made the United States the prime destination for bitcoin miners. According to the Cambridge Centre for Alternative Finance, U.S. bitcoin’s hash rate has increased 428% since September 2020. Hash rate is an industry term used to describe the collective computing power of miners.
The global cryptocurrency mining market is expected to grow at a 16.1% CAGR to $1.61 billion by 2025. And the newly debuted ProShares Bitcoin Strategy ETF (BITO) jumped 4.8% and traded $984 million in volume in its first trading session on Tuesday.
Given this backdrop, Wall Street analysts expect crypto mining stocks of Marathon Digital Holdings, Inc. (MARA), Riot Blockchain, Inc. (RIOT), and Hut 8 Mining Corp. (HUT) to gain considerably in the near term. The analysts have rated these stocks ‘Strong Buy.’
Click here to check out our Cryptocurrency Industry Report for 2021
Marathon Digital Holdings, Inc. (MARA)
Las Vegas-based MARA is a digital asset technology company that is focused primarily on mining cryptocurrencies on the blockchain ecosystem and operates as a digital asset generator in the United States.
On September 9, MARA announced that Canadian blockchain and cryptocurrency technology company DMG Blockchain Solutions Inc. (DMGGF) would join MaraPool, MARA’s bitcoin mining pool. This partnership is expected to cater to the needs of North American miners and enhance the mining experience.
On September 1, the company declared its collaboration with financial services and technology firm New York Digital Investment Group LLC (NYDIG) to provide members of MaraPool with NYDIG’s institutional-grade services. The collaboration might benefit MARA by providing MaraPool miners with world-class solutions and valuable expertise.
In its second fiscal quarter, ended June 30, MARA’s total revenues increased 10,146.6% year-over-year to $29.32 million. Its non-GAAP income from operations came in at $20.06 million, registering a substantial increase from its negative year-ago value.
A $0.74 consensus EPS estimate for the current quarter (ending December 2021) indicates a 1,025% year-over-year increase. Likewise, the $119.07 million consensus revenue estimate for the current quarter reflects a 4,403.4% improvement from the prior-year quarter.
The stock has gained 2,203.9% in price over the past year and 416.4% year-to-date to close yesterday’s trading session at $53.91.
All four analysts rating the stock have rated it Buy. The 12-month median price target of $62.50 indicates a 15.9% potential upside. The price targets range from a low of $48.00 to a high of $87.00. MARA has a ‘Strong Buy’ rating.
Riot Blockchain, Inc. (RIOT)
RIOT, with its subsidiaries, is engaged in a cryptocurrency mining operation in North America. The Castle Rock, Colo., company is focused primarily on Bitcoin mining with a large fleet of publicly-traded miners.
On October 19, RIOT announced the development of an immersion-cooling technology at its Whinstone facility for bitcoin mining hardware cooling. Regarding this development, Jason Les, RIOT’s CEO, said, “By leveraging technology, industry-leading low power costs, and economies of scale, Riot intends to continue driving operating and capital efficiencies for its self-mining business and its institutional clients. Due to these efficiencies, we anticipate observing an increase in the company’s hash rate and productivity through 2022, without having to rely solely on purchasing additional ASICs.”
RIOT’s total revenue increased 1,668.7% year-over-year to $34.35 million in its second fiscal quarter, ended June 30. This can be attributed to a 1,539.7% increase in net revenue from cryptocurrency mining versus the prior-year quarter to $31.45 million. Its net income and net income per share stood at $19.34 million and $0.22, respectively, both up substantially from their negative year-ago values.
The Street’s $0.41 EPS estimate for the current quarter (ending December 2021) reflects a rise of 156.2% from the prior-year quarter. The Street’s $94.45 million revenue estimate for the current quarter indicates a 1,685.1% improvement from the same period last year. Moreover, RIOT has an impressive earnings surprise history; it has topped the consensus EPS estimates in three out of the trailing four quarters.
RIOT’s stock has gained 834.2% in price over the past year to close yesterday’s trading session at $30.83. It has gained 81.5% year-to-date.
RIOT has a ‘Strong Buy’ analyst rating consensus. All five analysts rating RIOT have rated the stock Buy. The $46.60 12-month median price target indicates a 51.2% potential upside. The price targets range from a low of $42.00 to a high of $51.00
Hut 8 Mining Corp. (HUT)
HUT is a Canada-based cryptocurrency mining company that engages in industrial-scale bitcoin mining operations in North America.
On September 17, HUT closed a public offering of common shares at $8.55 per share. The proceeds from the offering are expected to be used to fund digital assets and potential strategic partnerships and acquisitions.
In September, the company announced that it had achieved a key milestone in its partnership with blockchain and AI technology company MicroBT with the inception of a repair services agreement that enables HUT to take up in-warranty work for MicroBT miners. The company expects the agreement to provide long-term financial benefits for the company and reduce machine downtime.
For its second fiscal quarter ended June 30, HUT’s total revenue increased 263.5% year-over-year to CAD33.55 million ($27.16 million). Its mining profit climbed 2,646.6% from the prior-year quarter to CAD19.14 million ($15.50 million). Its Adjusted EBITDA improved 21,986.2% from the same period last year to CAD14.36 million ($11.62 million).
Analysts expect its EPS to increase 147.3% year-over-year in the current year (fiscal 2021) to $0.39. The $150.66 million consensus revenue estimate for the current year indicates a 367% rise from the prior year.
The stock has gained 1,455.1% in price over the past year and 336% year-to-date to close yesterday’s trading session at $11.99.
Street analysts have rated the stock ‘Strong Buy.’ All four analysts that rated HUT have rated it Buy. The 12-month median price target of $13.93 indicates a 16.2% potential upside. The price targets range from a low of $9.71 to a high of $20.00.
Click here to check out our Cryptocurrency Industry Report for 2021
MARA shares were trading at $54.05 per share on Wednesday afternoon, up $0.14 (+0.26%). Year-to-date, MARA has gained 417.72%, versus a 22.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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