Bitcoin and its sibling cryptocurrencies have been picking up headlines lately, sometimes scooping them in by the bucketful. That’s inevitable, given the spectacular volatility the cryptos have seen in recent months, more than doubling in value and falling back down again. Bitcoin, the flagship, peaked above $67,000 in November, only to fall as low as $35,000 in the latter half of January. It’s trading at $43,000 now, on an upward tack.
These kind of asset movements naturally attract investors – but the high price of some cryptos can be a turnoff. For investors looking to profit from the cryptocurrency boom, however, there is an alternative in the form of the bitcoin miners. These are tech companies, computer and computing firms that run banks of high-powered linked servers dedicated to solving blockchain equations and ‘mining’ bitcoin.
Sector expert Chris Brendler, looking at bitcoin miners for D.A. Davidson, sums up the situation in a recent note: “With the stocks at these levels, the miners offer a superior risk/reward to the underlying BTC as we see limited downside from here, barring a complete BTC collapse sub-$10,000…”
Bearing this in mind, we used TipRanks’ database to find two compelling bitcoin mining stocks, according to Wall Street analysts. Both tickers boast a Strong Buy consensus rating and could climb over 100% higher in the year ahead.
Marathon Digital (MARA)
The first stock we’ll look at, Marathon, is a $2.95 billion company, and by that market cap is one of North America’s largest bitcoin miners. Marathon’s assets include a major data center adjacent to the Beowulf Hardin power generation station in Hardin, Montana. The location of the data center next to a 105 megawatt power facility keeps the energy cost down to just 2.8 cents per kilowatt hour, while the data center’s 32,000 S19 Pro Miners are capable of calculating 3.6 EH/s.
What this means is, Marathon has reached the Majors in its niche. The company’s earnings have been volatile, following the pattern in cryptos generally, but revenues have been rising all year. The top line first exceeded $1 million in Q4 of 2020; by 3Q21, the company was bringing in $51.7 million in revenue, up 76% sequentially – and an astounding 6,000% year-over-year. The company mined 1,252 bitcoins in 3Q21, a 91% increase in production over Q2. The company ran a net loss of 22 cents per share in Q3; this was, however, an improvement over the $1.09 net loss in Q2.
We’ll know on March 28, at the next quarterly release, how Marathon finished 2021. Monthly data released for January shows continued strong growth. The company produced another 462 bitcoin that month, up 816% yoy, and increased its total bitcoin holdings to 8,595, currently valued at over $376 million. The company finished January with a total liquidity of $519 million, which includes $189 million in cash on hand.
Checking in again with analyst Chris Brendler, we find that the crypto expert sees Marathon’s liquidity as the key point, writing of the company: “Crypto mining stocks have been rocked over the last 2 months, and we think the primary culprit has been concerns about access to capital. Among peers, Marathon is among the best positioned [with] substantial BTC holdings. Marathon is also the only miner providing monthly cash balances and the company ended January with $189M in cash and $520M in total liquidity, more than enough to fund its 2022 growth plans.”
To this end, Brendler rates Marathon shares a Buy alongside a price target of $65, indicating potential for ~125% upside this year. (To watch Brendler’s track record, click here)
Brendler isn’t the only analyst who’s bullish on Marathon; the company has a unanimous Strong Buy consensus rating, based on 5 recent analyst reviews. Shares are priced at $28.82 with an average target of $61.60, for a one-year upside ~114%. (See MARA stock forecast on TipRanks)
Riot Blockchain (RIOT)
Now let’s look at Riot Blockchain. Riot is a peer of Marathon, and the second-largest company in the US bitcoin mining industry. With a market cap of $2.25 billion, Riot has deep enough pockets to develop the expensive server assets needed in crypto mining. Over the course of the past two years, the company has been expanding its data centers, and is estimated to have over 22,646 mining rigs in operation, with a hashing capacity exceeding 3.0 EH/s. Looking ahead, the company has 58,500 S19 series mining rigs on order, with full deployment expected by the end of 4Q22.
Riot has a current operating energy consumption of 91 megawatts; the company cut back on that during the recent winter storms in Texas. The Texas facility, Whinstone, is the largest single bitcoin mining data center in North America and operates in 190,000 square feet of space. Leveraging on the site’s scale, the company is able to keep power costs down to 2.5 cents per kilowatt hour.
In its January update, Riot noted production of 458 bitcoin for the month, up 252% year-over-year. The company stated that its mining rigs expanded to 32,552 sets, and reached a total hash capacity of 3.4 EH/s. The company claims 5,347 bitcoin in its holdings, worth approximately $234 million. Riot expects to receive a total of 5,768 new S19j bitcoin mining rigs during the course of February, and to finish 2022 with a total has rate of 12.8 EH/s.
Writing for Roth Capital, 5-star analyst Darren Aftahi is impressed with Riot Blockchain, noting: “One of the largest differentiators we see with RIOT is the level of vertical integration and expertise with developing infrastructure. The most fundamental difference in an owned and operated (O&O) model compared to an outsourced model is the tradeoff of upfront capital expenditures for higher margins moving forward, which is an important factor in RIOT’s aim to become one of the lowest cost producers of BTC. There are also benefits to this if BTC were to experience a prolonged bear market where the need for a low cost of production is paramount.”
These comments back up Aftahi’s Buy rating, and his $46 price target indicates confidence in RIOT’s ability to soar ~139% in the next twelve months. (To watch Aftahi’s track record, click here)
The Street generally has taken a bullish stance on this stock, giving it 6 positive reviews for a Strong Buy consensus rating. RIOT shares are trading for $19.27 and have an average target of $44.20, for an upside potential of ~129% over the next 12 months. (See RIOT stock forecast on TipRanks)
To find good ideas for crypto stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
