On Tuesday, Roth/MKM maintained a Buy rating and a $20.00 stock price target for Riot Platforms (NASDAQ:RIOT), a prominent player in cryptocurrency mining. The firm's stance comes as Riot Platforms announces its intention to acquire a competitor, which is expected to significantly expand its operational capacity and market position.
The acquisition of the competitor, which operates approximately 13 sites across four countries, is poised to diversify Riot's power footprint, especially in Latin and South America. Despite potential geopolitical and regulatory risks, the merger is set to increase Riot's year-end 2024 hash rate target to approximately 52 EH/s when combined with the competitor's projections. This figure would surpass Marathon's (NASDAQ:MARA) target of approximately 50 EH/s, positioning Riot as the largest publicly traded miner by hash rate.
Riot Platforms is also planning to expand its Corsicana site, which, along with additional expansions from the acquired company, could provide Riot with a total power capacity of around 2.3GW. This expansion is seen as a strategic move following the Bitcoin halving event, as larger players in the industry begin to target smaller miners facing increased mining costs.
The deal, announced at an equity value of around $950 million, implies an enterprise value (EV) of approximately $725 million, based on the most recent filings and post-first-quarter balances. This valuation adjusts to an EV of about $632 million when considering the long-term deposit for miners on the competitor's balance sheet, which stands at roughly $94 million. These figures suggest that the acquisition is within a reasonable range of valuation compared to industry peers.
Riot's acquisition strategy includes offsetting capital expenditure costs for expansion through the competitor's existing machine prepayment, which totals approximately $96 million. This prepayment is for mining machines from Bitmain, a leading producer of cryptocurrency mining hardware. Prior to the acquisition, Riot was fully funded through 2025, but financial plans may be revised following the completion of the takeover.
InvestingPro Insights
The recent strategic moves by Riot Platforms (NASDAQ:RIOT) to expand its operational capacity and market position through acquisitions have been met with interest from investors and analysts alike. With Roth/MKM maintaining a Buy rating and a $20.00 price target for Riot, it is clear that the company's growth prospects are being taken seriously. To provide further context to these developments, let's consider some key metrics and tips from InvestingPro.
Riot Platforms currently holds a market capitalization of $3.09 billion, with a P/E ratio of 14.86, which reflects investor confidence in the company's earnings potential. Still, it is worth noting that the adjusted P/E ratio for the last twelve months as of Q1 2024 stands at 21.91, indicating a higher valuation in the near term. The company's revenue has grown by 13.51% over the last twelve months, demonstrating a solid trajectory in sales growth that analysts anticipate will continue in the current year.
InvestingPro Tips highlight that Riot is trading at a low P/E ratio relative to near-term earnings growth, which may appeal to value-oriented investors. Moreover, the company's liquid assets exceed its short-term obligations, suggesting a stable financial position for handling immediate liabilities. For those considering an investment in Riot Platforms, there are over 15 additional InvestingPro Tips available, which can provide deeper insights into the company's financial health and market potential.
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