As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
GAMESTOP LAUNCHING NFT, CRYPTO UNIT: GameStop (GME) is launching a division to develop a marketplace for nonfungible tokens and establish cryptocurrency partnerships, the Wall Street Journal’s Sarah Needleman reported Thursday, citing people familiar with its plans. The company has hired more than 20 people to run the unit, which is building an online hub for buying, selling and trading NFTs of virtual videogame goods such as avatar outfits and weapons. The company is asking game developers and publishers to list NFTs on its marketplace when it launches later this year and the sources noted that GameStop also is close to signing partnerships with two crypto companies to share technology and co-invest in the development of games that use blockchain and NFT technology.
After the Wall Street Journal report, Tokyo-based games industry analyst Serkan Toto told Bloomberg: "The market loves the decision, the struggling company has bought some time by dangling NFTs in front of investors. However, I am very skeptical if GameStop can make it on its own. The company definitely needs partners to compete with the likes of OpenSea and get video game companies to cooperate."
ANALYSTS CALL COINBASE A BUY: BofA analyst Jason Kupferberg upgraded Coinbase (COIN) to Buy from Neutral on Thursday with an unchanged $340 price target. The analyst cited increasing signs of revenue diversification beyond retail crypto trading and believes that this trend could accelerate in 2022 and beyond. Subscription and Services revenues represented 12% of total net revenues in Q3, up from 4% in 2020, and these should grow to 16% of total in 2023, Kupferberg said. Drivers of this trend will likely be a combination of offerings such as staking, earn campaign, Coinbase’s non-fungible token platform, and decentralized finance products such as DeFi Yield, he added. The analyst believes scaling of these non-trading revenue streams could also catalyze increased interest in the stock among institutional investors.
Additionally on Friday, JPMorgan analyst Kenneth Worthington said the crypto markets had a big year in 2021 and greater acceptance by mainstream investors and companies is likely in 2022. Cryptocurrencies are technology and development "continues to blossom" driven by the scaling of Layer-1 chains and the introduction and growth of Layer-2, said the analyst. Worthington says that if 2021 was the year of the nonfungible token, he sees 2022 as possibly the year of the "blockchain bridge or the year of financial tokenization." As such, he sees the cryptocurrency markets as increasingly relevant to financial services. The use cases for the crypto markets will continue to grow and new projects and tokens with more and different use cases will surface, Worthington contended. The analyst said that with these projects attached to tokens and Coinbase, a leading exchange to buy and sell tokens, Coinbase shares are a "leading direct beneficiary" of crypto market growth. The stock is still a buy, wrote Worthington, who keeps an Overweight rating on Coinbase with a $447 price target.
MARATHON PROVIDES PRODUCTION UPDATE: Marathon Digital (MARA) published unaudited bitcoin production and miner installation updates on Monday for December 2021. The company produced approximately 3,197 self-mined bitcoin in fiscal year 2021, an 846% increase year-over-year. Marathon produced 1,098 self-mined bitcoin during Q4, including 484.5 self-mined bitcoin during December 2021. The company increased total bitcoin holdings to approximately 8,133 BTC with a fair market value of approximately $375.8M. Cash on hand was approximately $268.5M and total liquidity was approximately $644.3M. Marathon’s existing mining fleet consists of 32,350 active miners producing approximately 3.5 EH/s.
CANTOR STARTS RIOT WITH OVERWEIGHT: Cantor Fitzgerald analyst Mike Colonnese initiated coverage of Riot Blockchain (RIOT) on Tuesday with an Overweight rating and $45 price target. Riot in is one of the largest, vertically integrated cryptocurrency mining companies in North America with 350 MW of developed bitcoin mining capacity and a deployed fleet of nearly 30,000 miners producing an aggregate hash rate of three exahash per second, Colonnese said. This means the company is currently capable of mining 16-17 bitcoin per day, on average, which equates to $825,000 in daily bitcoin mining revenue, the analyst said. He believes Riot is in a "unique position" to continue to win share of the bitcoin mining industry in 2022 and beyond. The company is one of the best ways for investors to gain exposure to bitcoin without directly owning the digital asset, said Colonnese.
Additionally on Wednesday, Riot announced production and operations update for December 2021. In December, Riot produced 425 BTC, an increase of approximately 334%, as compared to the December 2020 production of 98 BTC. In Q4, Riot produced 1,355 BTC, increasing approximately 349%, as compared to Q4 2020 production of 302 BTC. In 2021, Riot produced 3,812 BTC, increasing approximately 269%, as compared to 2020 production of 1,033. As of December 31, 2021, Riot held approximately 4,889 BTC, all produced by the company's self-mining operations. Riot currently has a deployed fleet of approximately 29,593 miners, with a hash rate capacity of 3.1 EH/s.
B. RILEY LOWERS PRICE TARGETS: On Wednesday, B. Riley analyst Lucas Pipes lowered the firm's price target on Marathon Digital to $74 from $92 and kept a Buy rating on the shares. Pipes also lowered the firm's price target on Riot Blockchain to $53 from $82 and kept a Buy rating on the shares. The analyst cited higher than expected capital cost of the digital mining industry for the reduced price target. He adjusted his base target 2023 enterprise value to EBITDA multiple for the industry from 13 times to 11 times. Recent data points call for a more conservative framework while the industry develops more bargaining power, Pipes said. While the industry as a whole has grown "dramatically and overwhelmingly successfully," scaling has also brought unique challenges from access to power, to miner deliveries, to miner uptime which has been impacting sentiment and multiples in the space, said the analyst.
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Overstock (OSTK), Ideanomics (IDEX), Riot Blockchain, Pareteum (TEUM) and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin dropped roughly 10% this week at $41,811 in U.S. dollars, according to TradeBlock.
Bitcoin
+
Bitcoin
+
Bitcoin
+
Ethereum
+
Litecoin
+
Dogecoin
+
GameStop
+1.21 (+0.93%)
Coinbase
-0.26 (-0.11%)
Marathon Digital
-0.28 (-0.95%)
Riot Platforms
-0.925 (-4.32%)
AMD
+0.22 (+0.16%)
Nvidia
+6.03 (+2.19%)
OSTK
+
Ideanomics
+0.03 (+2.50%)
Pareteum
+
Srax
-0.015 (-0.35%)