Riot Blockchain vs. Hut 8 Mining: Which Crypto Mining Stock Is a Better Buy? China's intensifying crackdown on the cryptocurrency space is the key driver behind the recent slump in digital assets. But this also allows contraria...
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China's intensifying crackdown on the cryptocurrency space is the key driver behind the recent slump in digital assets. But this also allows contrarian and growth investors to buy shares of Riot Blockchain (RIOT) and Hut 8 Mining (HUT) at attractive valuations. So, which cryptocurrency mining stock should you place your bets on?.
The cryptocurrency space has allowed investors to generate exponential gains in the last few years. To gain exposure to this disruptive space, investors can of course buy digital currencies, such as Bitcoin and Ethereum, via trading exchanges, such as Coinbase (COIN).
Investors can also gain exposure by purchasing shares of crypto-mining companies, such as Riot Blockchain (RIOT) and Hut 8 Mining (HUT). The stock prices of these mining companies are closely tied to the prices of the currencies they mine, making them as volatile as the underlying asset.
The prices of Bitcoin, Ethereum, and several other cryptos, have lost momentum in the last week as China continued its crackdown in this space. Shares of Riot Blockchain are down more than 60% from its 52-week high while Hut 8 Mining stock is down more than 30% from record highs. This pullback could provide crypto bulls an opportunity to buy the dip. Which is why today we will analyze these two stocks to see which is currently the better investment.
Hut 8 Mining stock is reasonably valued
In the June quarter, Hut 8 Mining reported sales of CA$33.5 million compared to CA$9.22 million in the prior-year period. Its gross profit stood at CA$16.79 million in Q2 of 2021 compared to a loss of CA$6.26 million in the last year.
Its self-mining operations generated CA$31.4 million in sales while the company's hosting service brought in CA$2.2 million in sales. Hut 8 Mining's adjusted EBITDA in Q2 stood at CA$14.4 million, up from just CA$0.1 million in the prior-year period. The bottom-line improvement was driven by the expansion of the company's operations and improvement in mining economics.
Hut 8 Mining mined 553 Bitcoins in Q2 and mined 1,092 Bitcoins in the first six months of 2021. At the end of Q2, Hut 8 Mining held 3,824 Bitcoin that is currently valued at $164.4 million.
Wall Street expects Hut 8 Mining to grow sales by 322.7% to CA$172.1 million in 2021 and by 83.7% to CA$316.15 million in 2022. This will enable the miner to improve earnings per share from CA$0.06 in 2020 to CA$0.75 in 2022. We can see that the stock is trading at a forward price to sales multiple of 5.53x and a price to earnings multiple of 14.2 which is really cheap given its expected growth forecasts.
Riot Blockchain stock more than doubled in the first half of 2021
Shares of Riot Blockchain rose by 122% in the first six months of 2021 and have since declined 23% in market value. With mining facilities in New York and Texas, Riot Blockchain held 2,243 crypto tokens at the end of June 2021. It now plans to more than double mining capacity in the next 15 months. Riot Blockchain also ended the quarter with $172 million in cash and just $8.3 million in debt.
Analysts tracking Riot Blockchain expect sales to rise by almost 18x year over year to $226 million in 2021 and by 100% to $451 million in 2022. Comparatively, its bottom-line is forecast to improve from a loss of $0.3 per share in 2020 to earnings of $1.67 per share in 2022.
Riot Blockchain stock is valued at a forward price to sales multiple of less than 6x and a price to earnings multiple of 16.8x.
The final takeaway
Bitcoin bulls should find both of these crypto mining stocks attractive. RIOT and HUT miners are trading at attractive multiples and have enough liquidity to endure a volatile macro-environment. This lowers overall operating risks for investors as Bitcoin continues to swing wildly. As for which stock is a better investment, I believe both will significantly benefit if we experience another bull market in cryptocurrencies, especially Bitcoin. However, I slightly favor RIOT, as
Wall Street expects RIOT to rally more than 70% from its current price in the next 12-months.
RIOT shares were trading at $28.11 per share on Monday morning, up $0.18 (+0.64%). Year-to-date, RIOT has gained 65.45%, versus a 19.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.
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