RIOT stock has shown a stellar rally over the past month and soared as much as 85% since late March. The recent bullish sentiment was driven by Riot Blockchain Inc’s (NASDAQ:RIOT) solid quarterly earnings and jump in cryptocurrency prices.
Rise in Cryptocurrency Price
RIOT’s gain was fuelled by the fact that Riot Blockchain finally filed its 2018 results after being late in line with the requirements of SEC. The increase is also associated with the recent leap in cryptocurrency prices steered by Bitcoin, which has gained considerably since the start of April.
RIOT made most of its revenue from the mining of Litecoin, Bitcoin, and Bitcoin Cash, done at its 8,000 mining facilities across Oklahoma. RIOT generated $7.8 million in revenue in 2018, which equates to a year-over-year growth of around 2,809%. The company reported a $58 million net loss, attributed to noncash expenses such as impairments as well as stock-based compensations of $45.2 million. The impairments were a result of the significant decline in crypto prices. Although RIOT has some net losses, investors may still be interested due to its 25% gross margin before D&A and the fact that the company does not have any long term debt.
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Prospects and Outlook
Despite RIOT having significant revenue growth in 2018, it doesn’t seem like it will be replicated this year. However, if cryptocurrency prices maintain the momentum of the Q1 2019 FY, revenue is likely to be flat to last year or grow around 40% compared to 2018. However, if RIOT fails to grow its mining capacity or add other revenue streams its stock may decline despite the increase in cryptocurrency prices.
The company began the year with $0.932 million in cash and cash equivalents as well as digital currencies and with a cash burn rate of between $3 million and $4 million a month. RIOT will ultimately need debt financing or equity to fund operations in 2019.
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