B. Riley estimates "highly attractive" ROICs for digital miners that have access to equipment and low-cost electricity B. Riley analyst Lucas Pipes initiated coverage of Riot Blockchain (RIOT) and Marathon Digital (MARA) with Buy ratings as he sees "significant opportunities" from current levels for miners that have the infrastructure in place and can build scale. Riot plans to have more than 70,000 miners in place by the end of 2022, which the analyst believes may bring expansion into the Whinstone facility. Meanwhile, Marathon plans to have over 100,000 miners in place by year-end 2022, which may bring expansion of its physical presence outside of its core Hardin, MT, facility into play, Pipes added. Both stocks are trading higher on Wednesday as the overnight price of bitcoin hit its highest level since Friday above $40,800.
BUY RIOT, MARATHON DIGITAL: B. Riley analyst Lucas Pipes initiated coverage of Riot Blockchain and Marathon Digital with Buy ratings and price targets of $43 and $47, respectively. While challenges exist for the crypto mining space due to bitcoin (BTC) price volatility, the analyst sees "significant opportunities" from current levels for miners that have the infrastructure in place and that can build scale. Pipes estimates "highly attractive" returns on invested capital, or ROICs, for digital miners that have access to equipment and low-cost electricity.
The analyst highlighted that Riot is a well-established crypto miner with a leading position from a capacity perspective and has recently acquired the 300 MW Whinstone facility in Texas from Northern Data for $80M in cash and 11.8M shares. The company plans to have more than 70,000 miners in place by year-end 2022, which Pipes believes may bring expansion into the Whinstone facility, which is expandable to 750 MW of capacity. The analyst also thinks that other strategic initiatives are possible, and sees the recent appointment of CEO Jason Les as a "clear positive" given his strong background and expertise in the space.
Regarding Marathon Digital, Pipes pointed out that the company is a well-established digital asset miner with a leading position in terms of mining equipment procurement and operations. Marathon plans to have over 100,000 miners in place by year-end 2022, which may bring expansion of its physical presence outside of its core Hardin, MT, facility into play, as evidenced by Monday's binding letter of intent with Compute North, he contended. The analyst believes the launch of a North American mining pool and other strategic initiatives are likely to enhance the Marathon story. Additionally, he sees the recent appointment of CEO Fred Thiel as a "clear positive" given his strong background and expertise in the space.
PRICE ACTION: In Wednesday morning trading, shares of Riot have jumped over 11% to $28.01, while Marathon Digital's stock has gained more than 12% to $25.38. At time of writing, bitcoin's price is up nearly 5% on a 24-hour change basis to $39,033.20.
