Sign InSummary
Riot Blockchain, Inc. (RIOT) currently holds a substantial market cap but shows weak financial health according to its negative earnings per share and PE ratio, leading analysts to suggest that the company may be overvalued; however, the company's recent increase in hash rate and stock price indicates positive trends and aggressive expansion efforts, making it an attractive buy for high-risk, high-reward scenarios or a hold for conservative investors, while individuals seeking lower-risk investments may consider selling due to anticipated short-term pull-back and fundamental disadvantages. (July 12, 2023)
Fundamental Analysis
Riot Blockchain, Inc. (RIOT), holds a considerable market cap of $3.24 billion, illustrating a substantial presence in the NASDAQ market. However, the financial health of the company seems weak, as indicated by the negative earnings per share (-4.67). The discrepancy with the PE ratio (-3.89) is also considerable, suggesting that the company currently operates at a loss.
Notably, analysts' consensus for RIOT's target price is at $10.50, which is significantly below the company's recent close at $17.51. This statistic suggests that the market may have overvalued RIOT despite fundamental concerns.
Relevant news reveals that Riot has been increasing its hash rate in an effort to position itself for a higher acquisition of machines in the long run, while the surge in the company's stock price shows a positive trend. This displays management's efforts towards aggressive expansion and competitive positioning in the Blockchain industry.
Technical Analysis
Following the closing price of $17.51 on July 11, 2023, Riot Blockchain stock recorded a substantial increase of 3.86% compared to the previous trading day. In the short term, this increase indicates a positive sentiment among investors.
The stock's 50-day moving average reflected at $11.62, and the 200-day moving average stood at $7.80, both significantly below the current stock price. The fact that the stock price is trading above these moving averages indicates a strong upward trend and prevailing bullish sentiments among investors.
RIOT's Relative Strength Index (RSI14) is 84, which is above the typical overbought threshold of 70. This could signify that the stock is overbought and might experience a price correction in the near future.
The MACD, which stands at 0.48 (3-month), also suggests a short-term bullish signal as it is above zero. However, it's worth mentioning that MACD is a lagging indicator and may not accurately predict future price movements.
Price Forecast
Given the current overbought conditions (based on RSI), RIOT's stock price might experience a slight pull-back in the short-term (next trading day, July 12, 2023), particularly if profit-taking activities take place. However, the general trend is still positive, so the price likely to regain momentum over the upcoming week.
Comparing the fundamental and technical data with analysts' stock price targets, it is arguable that the stock is currently overpriced. But, considering the stock price's current trend, there's a possibility that the stock might reach towards its one-year high ($18.64) in the short term if the positive sentiment continues.
Conclusion: Buy, Hold, or Sell?
With negative EPS, alongside the analysts' lower stock price targets, the fundamental analysis suggests that RIOT stock is quite risky. From a technical standpoint, although the stock's performance has shown a steady upward trend, indicators such as RSI hint at a near-term price correction due to overbought conditions.
However, it is important to consider the news which states that RIOT has been actively improving its operations and expanding—specifically, increasing its hash rate. This suggests a positive long-term trend for the company.
As a speculation play, the stock presents an attractive buy for a high-risk, high-reward scenario. Otherwise, for more conservative investors, a "Hold" would be recommended if they already have RIOT stocks in their portfolio. For individuals looking for lower-risk investments, selling may be the prudent decision due to the anticipated short-term pull-back (based on RSI) and fundamental disadvantages including negative EPS and negative PE ratio.
Investors should carefully consider their risk tolerance and investment strategy before making a decision. It would also be worthwhile to keep an eye on the upcoming earnings announcement scheduled for August 7, 2023.
