On Wednesday, Bernstein SocGen Group maintained an Outperform stock rating and a $22.00 price target on Riot Platforms (NASDAQ:RIOT), a leading player in the Bitcoin mining industry. The firm's stance comes in light of Riot's recent move to acquire a significant stake in Bitfarms, another mining company.
Riot has proposed a public acquisition bid to Bitfarms' shareholders, offering $2.3 per share, which represents a 24% premium over Bitfarms' one-month average price. This offer follows Bitfarms management's rejection of a private offer last month.
Riot's bid for Bitfarms comes at a time when the latter has experienced a 48% decline in share price over the past three months, remaining relatively unchanged since a sudden CEO change in May, which also led to governance concerns.
Riot's ambition to become the world's largest public listed Bitcoin miner is evident in this move, especially as the combined operations of Riot and Bitfarms would yield 19.7 eH/s with 1GW of power capacity. Further capacity expansions are expected to bring this figure to 52 eH/s with 1.5 GW of combined power by the end of 2024.
Riot currently operates a 750MW facility in Rockdale, Texas, and has plans to build an additional 1 GW at Corsicana, Texas. The firm's approach to the Bitcoin mining sector as a strategic asset is notable, especially as power becomes a critical factor in scaling up AI computation.
Riot's financial position is strong, with no debt and over $1.3 billion in free cash and Bitcoin on its balance sheet, enabling it to potentially consolidate its position in the industry.
The consolidation trend in the U.S. Bitcoin mining sector is expected to leave approximately five key players controlling substantial capacity. Currently, more than 20 miners are publicly listed in the U.S. The smaller mining operations are also attracting interest from AI data centers seeking to acquire sites.
Riot's potential acquisition of Bitfarms, which has land sites in Canada, Paraguay, and Argentina, would not only increase its mining capacity but also provide geographical diversification.
InvestingPro Insights
As Riot Platforms (NASDAQ:RIOT) strategically maneuvers to expand its foothold in the Bitcoin mining industry, its financial health and market performance are critical factors for investors to consider. According to InvestingPro data, Riot holds a market capitalization of approximately $2.99 billion, with a Price/Earnings (P/E) ratio of 14.16. This relatively low P/E ratio, in comparison to its adjusted P/E for the last twelve months as of Q1 2024, which stands at 21.34, suggests that Riot is trading at a discount relative to near-term earnings growth.
Moreover, Riot's revenue growth over the last twelve months as of Q1 2024 has been 13.51%, indicating a steady increase in sales. This aligns with one of the InvestingPro Tips highlighting analysts' anticipation of sales growth in the current year. However, it's important to note that the company's gross profit margin during the same period was 16.89%, reflecting the challenges Riot faces in terms of profitability, as also noted by InvestingPro with concerns about weak gross profit margins and the expectation that net income may drop this year.
Investors looking to delve deeper into Riot's financials and future prospects can find additional insights and tips on InvestingPro. Currently, there are 16 more InvestingPro Tips available, which provide a comprehensive analysis of Riot's cash management, earnings projections, stock volatility, and valuation multiples. For those interested in making an informed investment decision, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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