Cryptocurrencies have taken the world by storm over the past few years. Bitcoin, the largest cryptocurrency by market capitalization, hit an all-time high of nearly $64,800 on April 14. However, it plunged below $50,000 later in the month following speculation that the United States Treasury may crackdown on money laundering executed through digital currencies.
So, it doesn’t come as a surprise that Berkshire Hathaway Inc.’s (BRK.A) vice chairman Charlie Munger, who has long criticized bitcoin for its extreme volatility and lack of regulation, called it “disgusting and contrary to the interests of civilization” at BRK.A’s annual shareholder meeting on May 1. Also, on April 30, Turkey’s central bank banned the use of cryptocurrencies as a form of payment, and India is expected to propose a law to ban cryptocurrencies and impose a fine for anyone trading or holding it.
Irrespective of one’s view on the prospects of cryptocurrencies, we think investors should stay away from fundamentally weak cryptocurrency stocks Coinbase Global, Inc. (COIN), Marathon Digital Holdings, Inc. (MARA), Riot Blockchain, Inc. (RIOT), Silvergate Capital Corporation (SI), and Bit Digital, Inc. (BTBT).
Coinbase Global, Inc. (COIN)
COIN provides financial infrastructure and technology for the crypto economy. The company provides a primary financial account, a platform to invest, store, spend, earn, and use crypto assets, and an online marketplace for hedge funds, money managers, and corporations, among others.
The company went public on April 14 and is expected to release its fiscal year 2021 first quarter financial results on May 13. However, analysts expect COIN’s EPS to be $4.24 in fiscal 2022, which represents a 35.4% year-over-year decrease. The company’s revenue is expected to decrease 2.8% year-over-year to $5.05 billion in fiscal 2022.
Considerable hype was associated with this IPO. However, the stock has lost 16.7% since going public and closed yesterday’s trading session at $294.21.
COIN’s poor prospects are apparent in its POWR Ratings also. It has a D grade for Value and Stability. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Marathon Digital Holdings, Inc. (MARA)
Founded in 2010, MARA is a digital asset technology company engaged in the mining of crypto currencies, with a focus on the block chain ecosystem and the generation of digital assets in the U.S. The company was formerly known as Marathon Patent Group, Inc.
MARA’s operating loss was $5.0 million for the fourth quarter ended December 31, compared to $1.30 million in the prior-year period. Its net loss for the quarter was $5.20 million compared to $1.20 in the prior-year period. Also, its loss per share was $0.10 in the quarter compared to $0.17 in the year-ago period.
The stock has lost 25.9% over the past month and closed yesterday’s trading session at $36.22.
MARA’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The stock has an F grade for Quality and Stability, and a D grade for Value and Sentiment.
Riot Blockchain, Inc. (RIOT)
Operating for more than two decades, RIOT, together with its subsidiaries, is focused on cryptocurrency mining operations in North America. The company is mainly focused on bitcoin mining and operates a fleet of roughly 7,043 miners.
Its operating loss was $19.32 million in fiscal 2020, which represents a 91.6% year-over-year decline. The company’s net loss was $12.67 million, compared to $20.04 million in the prior-year period. Its loss per share was $0.30 compared to $1.02 in the prior-year period.
The stock has lost more than 23% over the past month and closed yesterday’s trading session at $39.99.
RIOT has an overall D rating, which translates to Sell in our proprietary rating system. It has an F grade for Quality and Stability, and a D grade for Value. Click here to see RIOT’s rating for Momentum, Growth, and Sentiment.
RIOT is ranked # 62 of 76 stocks in the Technology – Services industry.
Silvergate Capital Corporation (SI)
SI operates as a bank holding company for Silvergate Bank, which provides banking products and services to business and individual clients internationally. It provides cash management services for digital currency-related businesses. The company also provides deposit products that include interest and noninterest bearing demand accounts, money market and savings accounts, and certificates of deposits.
SI’s total liabilities and shareholders’ equity increased 224% year-over-year to $7.22 billion for the first quarter, ended March 31. Furthermore, its valuation looks stretched. In terms of forward non-GAAP P/E, SI’s 43.27x is 260.2% higher than the 12.01x industry average. In terms of forward P/S, the stock’s 16.41x is 390.9% higher than the 3.34x industry average.
The stock has lost more than 28% over the past month and closed yesterday’s trading session at $103.20.
SI’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which translates to Sell in our proprietary rating system. It has an F grade for Value, and a D grade for Momentum, Quality, and Stability. Click here to see SI’s rating for Growth and Sentiment as well.
SI is ranked #46 of 46 stocks in the D-rated Pacific Regional Banks industry.
Bit Digital, Inc. (BTBT)
Formerly known as Golden Bull Limited, BTBT is in the bitcoin mining business. The company’s bitcoin mining facilities are located across Wuhai, Zhundong, Xilinhot and Sichuan China.
The company’s net loss was $1.91 million in its fiscal year 2020, compared to $9.68 in the prior-year period. Its loss per share came in at $0.06 compared to $0.62 in the prior-year period. Also, BTBT’s total liabilities were $1.89 million, up 340.8% year-over-year.
Block & Leviton LLP is expected to lead an investor suit against BTBT. It is alleged that BTBT misled investors by overstating its mining business. The stock has lost nearly 43% year-to-date and closed yesterday’s trading session at $12.49. It has also lost 12.8% over the past month.
It’s no surprise that BTBT has an overall D rating, which equates to Sell in our POWR Ratings system. The stock has an F grade for Stability, and a D grade for Value and Quality.
Click here to see BTBT’s ratings for Growth, Sentiment, and Momentum as well. BTBT is ranked #97 in the Financial Services (Enterprise) industry.
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COIN shares fell $0.14 (-0.05%) in after-hours trading Tuesday. Year-to-date, COIN has declined -14.51%, versus a 11.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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