As the world witnessed a cryptocurrency boom earlier this year – with the most popular digital currency bitcoin hitting an all-time high of $ 64,863.10 on April 14 – the intensification of the crackdown in China has resulted in a significant downturn in the cryptocurrency market. While bitcoin has so far lost more than half of its value since its April high, other cryptocurrencies have also fallen significantly.
Sentiment among crypto investors was further weakened by the hawkish pivot of the Fed. The Fed said last week that it expects inflation to rise 3.4% this year and sees two interest rate hikes in 2023, which is earlier than expected. Since this reflects the central bank’s growing concerns about inflation, risky assets like cryptocurrencies will likely continue to come under significant pressure.
Against this background, we believe it is wise to avoid cryptocurrency-related stocks such as Coinbase Global, Inc. (PIECE OF MONEY), Riot Blockchain, Inc. (RIOT), Marathon Digital Holdings, Inc. (MARA) and Bit Digital, Inc. (BTBT). They now seem significantly overvalued and should continue to decline in the short term.
Coinbase Global, Inc. (PIECE OF MONEY)
Financial technology company COIN is primarily focused on building a crypto economy, a transparent, crypto-enabled financial system that operates crypto assets. Operating in over 100 countries, COIN provides a one-stop-shop for hedge funds, fund managers, and businesses seeking to access crypto markets through advanced trading and custody technology.
COIN’s total revenue for the first quarter, ended March 31, 2021, was $ 1.80 billion, an increase of 844.8% from the previous year quarter . The company’s net profit was $ 771.46 million, up 2,312.9% year-over-year. However, according to its management, in a letter to shareholders, “Despite our good first quarter results, the rapid expansion of the crypto economy is also creating challenges for Coinbase. Competition is intensifying as new entrants to the market join the crypto economy every month. ”
COIN’s revenue and EPS are expected to decline 9.3% and 40.1%, respectively, year-over-year to $ 5.68 billion and $ 4.90, over its fiscal year 2022. In addition, in terms of non-GAAP PER its 24.53x is 110.7% higher than the industry average 11.63x. Its front EV / S of 7.12x is 131.2% higher than the industry average of 3.08x.
Law firm Schall announced on June 18, 2021 that it is investigating claims on behalf of COIN investors regarding alleged violations of securities laws. It examines whether the company has made false and / or misleading statements and / or failed to disclose relevant information to investors. The stock fell 0.8% over the past month to close yesterday’s trading session at $ 226.60.
COIN’s poor outlook is evident in its POWR odds also. The stock has a D rating for stability and value. POWR ratings assess stocks based on 118 different factors, each with its own weight.
Click here to see additional POWR ratings for COIN (Momentum, Growth, Quality, and Feeling). COIN is ranked # 56 out of 128 stocks in the D-rated Software application industry.
Click here to view our Software Industry Report for 2021
Riot Blockchain, Inc. (RIOT)
RIOT is a bitcoin mining company that focuses on exposure to the blockchain ecosystem through its cryptocurrency mining operations, in-house developed businesses, joint ventures, and targeted investments in the industry. It has deployed approximately 8,000 application specific integrated circuit (ASIC) miners at its cryptocurrency mining facility in Oklahoma.
The company’s total revenue increased 872.2% year-on-year to $ 23.20 million for the first quarter ended March 31, 2021. RIOT’s net profit was 7.53 million dollars, down from a loss of 4.28 million dollars the previous year. However, its total costs and expenses increased 133.2% year-on-year to $ 15.84 million. Its total liabilities also increased 162.9% from the fourth quarter (ended December 31, 2020) to $ 8.09 million.
Additionally, RIOT appears to be extremely overvalued now. In terms of forward non-GAAP P / E, its 45.53x is 74.5% higher than the industry average of 26.09x. Its front EV / S 15.55x is 272.9% higher than the industry average 4.17x.
RIOT finalized the acquisition of Whinstone US from Northern Data last month. However, the acquisition should weigh on its finances. The stock has lost nearly 48% in the past three months to close yesterday’s trading session at $ 31.57.
RIOT’s POWR ratings are consistent with this grim outlook. The stock has an overall D rating, which is equivalent to Sell in our proprietary rating system. It has an F rating for stability, value and quality, and a D rating for sentiment. Click here to also see RIOT’s ratings for Momentum and Growth.
RIOT is ranked # 68 out of 72 stocks in the D-rated Technology-Services industry.
Marathon Digital Holdings, Inc. (MARA)
Formerly known as Marathon Patent Group, Inc., MARA is a digital asset technology company. It operates cryptocurrencies with a focus on the blockchain ecosystem and the generation of digital assets. It has approximately 2,060 Bitcoin Miners ASICs in a co-hosted facility in North Dakota.
MARA’s total revenue for the first quarter ended March 31, 2021 was $ 9.15 million, up 1,444.8% year-over-year. Its net profit for the quarter was $ 83.36 million, compared to a loss of $ 1.06 million in the previous year quarter. However, its operating loss increased 4,209.9% year-on-year to $ 47.06 million. MARA’s total operating expenses were $ 56.21 million, an increase of 3,237.2% year-over-year.
The title seems considerably overpriced now. In terms of forward EV / S, MARA’s 11.81x is 183.2% higher than the industry average of 4.17x. Its forward P / S of 13.72x is also above the industry average of 4.06x.
MARA agreed with Compute North in May 2021 to host approximately 73,000 of its previously purchased Bitcoin miners as part of a new 300 megawatt data center located in Texas. However, the initial contract term is three years, and it is not certain that this will affect MARA’s finances in the short term. The stock has lost 35.4% in the past three months to close yesterday’s trading session at $ 27.83.
MARA has an overall F rating, which results in a strong sale in our proprietary rating system. It has an F rating for feeling, quality and stability, and a D rating for value.
In addition to the POWR Ratings we just outlined, we also rated it for Growth and Momentum. Click here to see all MARA notes. MARA is ranked n ° 99 out of 101 shares in the Financial Services (Businesses) industry.
Bit Digital, Inc. (BTBT)
Bitcoin mining company BTBT owns Bitcoin mining facilities in Wuhai, Zhundong, Xilinhot and Sichuan in China. It is also active in the car rental business and intends to rent its cars to private and corporate customers.
BTBT’s revenue from cryptocurrency mining was $ 43.95 million for its first fiscal quarter, ended March 31, 2021, up from $ 18,231 in the previous year’s quarter. Its net profit was $ 35.79 million, compared to a loss of $ 3.85 million in the prior year period. However, his total liabilities increased more than 65% sequentially to $ 3.13 million. Its net cash used in operating activities was $ 2.54 million, compared to $ 122,258 in the previous year quarter.
In terms of rolling 12-month EV / S, BTBT’s 5.07x is 11.7% above the industry average 4.54x.
Several law firms filed a class action lawsuit against BTBT in March 2021. It is alleged that the company overestimated the extent of its bitcoin mining operations and made other materially false and / or misleading statements. The stock has lost nearly 59% in the past three months and 18.9% in the past month to close yesterday’s trading session at $ 6.95.
BTBT’s POWR ratings are consistent with this grim outlook. The stock has an overall D rating, which is equivalent to Sell in our proprietary rating system.
It has an F rating for stability and quality and a D rating for value. Click here to also see BTBT’s ratings for Growth, Momentum, and Sentiment. BTBT is ranked # 93 in the Financial Services (Businesses) industry.
COIN shares were trading at $ 220.53 per share on Tuesday afternoon, down $ 2.07 (-0.93%). Year-to-date, COIN has fallen -32.82%, compared to a 13.37% increase in the benchmark S&P 500 over the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s keen interest in capital markets, wealth management and financial regulatory matters led him to a career as an investment analyst. Its goal is to educate individual investors by making complex financial issues easy to understand. After…