The cryptocurrency frenzy is building each day as investors shift to decentralized currencies amid rising inflation fears and U.S. dollar volatility. Approximately 46 million people, or 17% of the adult population in the United States, own at least some Bitcoin.
The U.S. is rapidly embracing the blockchain currency ecosystem. Fintech companies FIS Ventures and New York Digital Investment Group (NYDIG) recently partnered to enable U.S. commercial banks to offer crypto transactions to their customers through personal accounts. Also, major companies are actively enabling crypto-based transactions for the purchase and sale of goods and services.
Considering these developments, increasing numbers of investors are betting on cryptocurrencies. Furthermore, with the Federal Reserve lagging other central banks in developing digital dollars, the crypto frenzy in the United States is likely to continue in the near term. Thus, Wall Street analysts expect crypto players Marathon Digital Holdings, Inc. (MARA), Riot Blockchain, Inc. (RIOT) and Silvergate Capital Corporation (SI) to garner significant gains in the coming months.
Marathon Digital Holdings, Inc. (MARA)
MARA is a digital asset technology company that mines cryptocurrencies for the generation of digital assets. It is one of the largest enterprise cryptocurrency companies in North America. In March, MARA became the first company to launch a North America-based Bitcoin mining pool compliant with U.S. regulations and Office of Foreign Asset Control (OFAC) standards.
Also in March, MARA partnered with DMG Blockchain Solutions Inc. to leverage the latter’s Blockseer pool technology to filter transactions compliant with U.S. regulations. The joint venture is expected to help MARA operate its Bitcoin mining pool at 100% of its mining hashrate.
As one of the first and largest U.S.-regulatory compliant bitcoin pool operators, Wall Street expects MARA to gain traction in the coming months. It has a 12-month $50 price target, which represents 92.7% upside potential.
MARA mined 162.10 bitcoins in April, thereby increasing its total holdings to approximately 5,292 bitcoins as of May 1. The company’s total Bitcoin holdings have a $305.20 million market value. MARA’s revenues increased 1,454.1% year-over-year to $9.20 million in the first quarter, ended March 31, 2021. Its net income and EPS came in at $83.40 million and $0.87, respectively, representing a substantial rise from the negative year-ago values. MARA reported adjusted EBITDA of $137.40 million, representing a significant rise from a $479,000 loss reported in the prior-year quarter.
Analysts expect MARA’s EPS to improve 1,850% year-over-year to $2.10 in its fiscal year 2021. The company’s revenue is expected to rise 6,466.4% from the same period last year to $286.10 million.
Riot Blockchain, Inc. (RIOT)
RIOT is a well-known cryptocurrency mining company with a focus on Bitcoin mining operations. As of April 30, the company held more than 1,771 self-mined Bitcoins.
RIOT has been working towards implementing environment friendly miners, consistent with the global inclination towards carbon neutrality. The company projects it will utilize 22,946 Antminers using 73 megawatts of energy at a hashrate capacity of 2.3 exahash per second, by the second half of 2021. Wall Street expects this development to be a major driver of the company’s momentum as increasing numbers of investors shift to ESG investing. The stock has a $64 12-month price target, representing 114.3% upside potential.
RIOT is currently acquiring Whinstone US, Inc., which owns and operates the largest bitcoin hosting facility globally. The acquisition is valued at approximately $651 million, which will be paid for with $80 million in cash and 11.80 million RIOT shares. The acquisition marks a pivotal event for RIOT because with it it can scale its operations significantly to increase its Bitcoin mining volume.
RIOT mined 206 bitcoins in April, up 91% year-over-year. The company’s mining revenues increased 116% sequentially to $5.20 million in the fourth quarter ended December 31, 2020. This can be attributed to a 36% rise in totally new mined bitcoins to 303 bitcoins over this period. The company achieved profitability in this quarter, as net income came in at $3.90 million, significantly higher than the net loss of $1.70 million reported in the prior quarter.
A $0.20 consensus EPS estimate for the most recent quarter, ended March 31, indicates a 233.3% improvement year-over-year. The company has an impressive earnings surprise history also; it beat Street’s EPS estimates in three out of trailing four quarters. Analysts expect RIOT’s revenues to increase 918.4% from the prior year quarter to $24.30 million.
Silvergate Capital Corporation (SI)
SI is a banking holding company for Silvergate Bank that provides deposit products that include demand, money market and savings accounts. It also provides services such as commercial banking, business and real estate lending and cash management for digital currency related businesses.
SI has been raising capital to fund its blockchain operations. The company raised $287.50 million in gross proceeds through a follow-on public offering of 595,238 shares in January. The proceeds are expected to supplement SI’s and its wholly owned subsidiaries’ regulatory capital levels, as well as fund the company’s general corporate expenses. Also, in March, SI raised approximately $300 million through at-the-market equity offering as part of its ongoing capital management strategy.
In March, SI teamed up with Fidelity Digital Assets to expand its Bitcoin collateralized U.S.-dollar loans. This move should allow SI to increase its loan disbursement volume and interest income as customers leverage their bitcoin holdings for cash.
SI’s net income increased 188.6% year-over-year to $12.70 million in the fiscal first quarter ended March 31. Digital currency customer related fee income stood at $7.10 million, representing a 317.6% rise from the year-ago value. Its EPS came in at $0.55, up 139.1% from the same period last year. This can be attributed to a 431% rise in Silvergate Exchange Network (SEN) transaction volume, and an 858% rise in U.S.-dollar transfer volume.
The Street expects SI’s EPS to come in at $0.56 for the current quarter (ending June 2021), up 93.1% year-over-year. Also, the company surpassed consensus EPS estimates in each of the trailing four quarters. SI’s revenues are expected to improve 70.3% from their year-ago value to $36.60 million in the fiscal second quarter.
Of the four Wall Street analysts that rated the stock, three rated it Buy, while one rated it Hold. SI’s $163.75 12-month median price target represents a 92.4% potential upside. The stock’s price target ranges from a low of $150 to a high of $175.
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MARA shares were trading at $24.04 per share on Wednesday afternoon, down $1.91 (-7.36%). Year-to-date, MARA has gained 130.27%, versus a 9.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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