What’s The Story?
There are still prominent corporations that have yet to report results, so the earnings season is far from over. If you’ve been following the current cryptocurrency upswing, you may have been keeping an eye on Riot Blockchain (NASDAQ:RIOT), whose second-quarter earnings were just announced yesterday after the market closed.
Riot Blockchain’s stock began the day and has continued to slide, losing 5.5% at 11:30 a.m. ET.
Investors and industry analysts must be disappointed with these outcomes. The company’s top-line results of $72.9 million fell short of projections. This number was almost 5% lower than predicted. Compared to the predicted loss of just $0.15 per share in profits, the actual loss of $0.50 per share is shocking. The substantial noncash impairment charge related to Bitcoin seems to be the primary driver of this unexpectedly high total.
However, Riot Blockchain (NASDAQ:RIOT) did report $46.2 million in mining revenue, an increase of 46.6% year over year. Riot’s Bitcoin output more than quadrupled from 675 BTC to 1,395 BTC during the second quarter of this year, but the company’s growth pace was slowed by lower Bitcoin prices throughout the period.
When all of Riot’s miners, which it has ordered, are operational in the first quarter of next year, the company’s self-mining capacity is expected to have increased from the current 4.4 EH/s to 12.5 EH/s.
What Is The Reason For The Stock Gain?
The low expectations of these outcomes make them all the more intriguing to delve into. There is widespread agreement amongst investors and industry watchers that Bitcoin’s value has declined dramatically over the last year. It was inevitable that the decreased Bitcoin prices would have a trickle-down effect, making things seem worse than predicted.
However, the market does not seem to have considered the full scope of the impairment charge the business has taken. Furthermore, analysts had anticipated a greater EH/s rate from Riot than what was achieved this quarter. In light of the continued volatility in Bitcoin’s price, it’s clear that long-term worries haven’t subsided.
But even at lower Bitcoin prices, the business believes it can turn a profit if it meets its goal of roughly tripling its mining capacity by the first quarter of next year. Therefore, buying Riot Blockchain stock looks like a leveraged wager on the future direction of Bitcoin prices.
What’s Next?
Since Riot Blockchain (NASDAQ:RIOT) made a sizable loss while more than tripling output, the business may have turned off some investors. This earnings report shows miners don’t benefit much from economies of scale in a low-price market. As a matter of fact, increasing the output of a cost center is bad for the bottom line.
As Bitcoin is presently trading above Riot’s breakeven, and the noncash impairment has been eliminated, there is hope that the next quarter will be more successful. That’s what the market indicated this morning, at least.
Yet, the stock’s lack of forwarding momentum today seems to lend credence to the idea that more losses are conceivable if Bitcoin’s market fundamentals continue to worsen. Investors still look wary of the cryptocurrency market because of the high degree of uncertainty it presents. Riot Blockchain (NASDAQ:RIOT) stock is expected to continue being volatile until that changes.
Featured Image: Megapixl @Elnur
Author Shariq Khan 
