Bitcoin might have just endured one of the worst months in its history, but the latest bout of volatility is unlikely to deter companies in the crypto ecosystem from advancing their BTC related pursuits.
Which brings us to Riot Blockchain (RIOT). Last week, the company completed the acquisition of Whinstone US from Northern Data. The Bitcoin miner is paying $80 million and 11.8 million in common stock (valued at approximately $326 million) which will see it get its hands on a 100-acre facility with long-term access 750 MW of power, set to be home to Riot’s growing arsenal of Bitcoin mining rigs.
The company has said the new purchase amounts to the most significant milestone in its history, a sentiment shared by B. Riley’s Lucas Pipes, who calls the official closure a “major positive for the stock.”
“Not only is Riot's growth significantly de-risked with the acquisition now complete, but the closure also allowed Riot to disclose a number of important guidance items to investors: including final net energy costs (2.5 cents per kWh) and estimated power capacity (for both Riot and its hosted rigs),” the 5-star analyst said.
Along with disclosing net energy costs, the company revealed it now expects to reach a total hash rate of 4.6 EH/s by 4Q21, which by 4Q22 should increase to 7.7 EH/s. Development work at the newly acquired facility is expected to begin pronto and once fully operational will expand the company’s capacity from 300 MW to 750 MW.
Importantly, Pipes adds, Riot also issued guidance on the amount of power capacity needed for hosting rigs. Hosting capacity is currently around the 180 MW mark, but by the end of the year, management believes this will most probably rise to 300 MW.
Accordingly, based on the “additional disclosures around hosting fees,” Pipes made some revisions to his RIOT model. The analyst now expects 2022 and 2023 adjusted EBITDA to increase from the prior $213 million and $294.5 million, respectively, to $231 million and $296 million.
To this end, Pipes rates RIOT a Buy along with a $44 price target. This figure implies ~51% from current levels. (To watch Pipes’ track record, click here)
Only one other analyst is currently tracking Riot’s progress, also recommending to Buy. The stock’s Moderate Buy consensus rating is backed by a $42 average price target, which could yield investors returns of 44% in the year ahead. (See RIOT stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.