Since October, shares of five cryptocurrency-mining stocks have spiked to 12-month highs of up to nearly five times their prices at this time last year. All five currently have market caps of more than $1 billion, and most have dropped between 40% and 50% of their share prices since November 10, when Bitcoin posted a 12-month high of more than $68,000.
Bitcoin has added more than 60% to its value over the past 12 months, but at a current price of around $47,500, the cryptocurrency trades about 30% lower than it did on November 10. And the bitcoin miners are taking a serious hit. Yet, they continue to add mining machines in pursuit of a payoff for being first to verify a block and add it to the blockchain.
Here are some data points that miners know and that investors should too:
- Only 21 million bitcoins will ever be produced.
- More than 18.9 million already have been mined (just over 90%).
- The reward to miners for verifying a block is currently 6.25 bitcoins (around $299,000 at the current price).
- The reward will be cut by 50% (known as block halving) sometime in 2024.
- The supply of bitcoins to mine is expected to be exhausted by 2040.
As the number of available bitcoins and the reward size fall, completing a block (which takes about 10 minutes) and earning the reward will continue to pay off because each bitcoin will be worth more. How much more? Ark Invest’s Cathie Wood, for example, has said that bitcoin prices could rise by another $500,000 as institutions increase their allocations to the digital currency to 5% of their portfolio’s value. Crypto miners with the highest hashrates (quintillion guesses per second) will have an advantage in capturing that wealth.
With that bit of background, let’s take a look at the five bitcoin miners with market caps of more than $1 billion. In the following comments, cash burn refers to negative free cash flow.
Marathon Digital Holdings Inc. (NASDAQ: MARA) has a market cap of around $3.48 billion, and the stock has added about 175% to its value over the past 12 months. The company recently announced that it will pay $879 million to acquire 78,000 mining machines from Bitmain in six deliveries of 13,000 machines in each of the past six months of next year. By the time all the miners are operating, Marathon will be generating some 23.3 exahashes per second in the company’s bitcoin-mining operations.
Only four analysts cover Marathon stock, but they all have rated the stock a Buy or Strong Buy, with a median price target of $57.50 and a high target of $92. Over the past 12 months, the company has burned $337.5 million in cash while posting $92.8 million in revenue and a net loss of $86.8 million. Marathon is expected to post earnings per share (EPS) of $1.49 for the 2021 fiscal year and $3.65 for fiscal 2022. Sales are forecast to rise from around $190 million in 2021 to $757 million (up almost 300%) next year.
In late morning trading Thursday, Marathon traded up about 1.4% to $34.37, in a 52-week range of $9.62 to $83.45. The average daily trading volume is around 13.4 million shares.
Riot Blockchain Inc. (NASDAQ: RIOT) has a market cap of around $2.68 billion, and the stock has added about 47% to its share price over the past year. In November, Riot produced 466 bitcoins, to bring its total production for the year to 3,387. The company reported total holdings of approximately 4,464 bitcoins. At that time, Riot had a fleet of about 29,095 mining machines with a hashrate of 3.0.
Like Marathon, analyst coverage is scant but is also all positive. Six brokerages give the stock a Buy or Strong Buy rating, with a median price target of $48 and a high target of $82. Riot has burned through $268.9 million in the past 12 months, while posting revenue of $127.6 million and net income of $15.4 million. The company is expected to report fiscal 2021 revenue of $219.56 million and EPS of $1.17. Next year, analysts have estimated revenue will more than double to $478.7 million and EPS will increase by 63% to $1.91.
Riot Blockchain traded up about 2.4%, at $23.55 in a 52-week range of $15.35 to $79.50. The average daily trading volume is around 15.1 million shares.
Hut 8 Mining
Toronto-based Hut 8 Mining Corp. (NASDAQ: HUT) has a market cap of about $1.44 billion, and the stock has added about 159% to its share price over the past 12 months. Hut 8 mined 265 bitcoins in November, and the company’s total balance held in reserve is 5,242. The company’s current hashrate is approximately 1.7.
Just four analysts cover the stock, and they all have a Buy or Strong Buy rating on the shares, with a median price target of $19.50 and a high target of $20. The company burned through $88.8 million over the past 12 months, with more than half of that coming in the third quarter. Revenue for the past year totaled $128.9 million and net income totaled $65.8 million. The consensus revenue estimate for fiscal 2021 is $140.37 million, and EPS is pegged at $0.44. In fiscal 2022, analysts are looking for EPS of $1.44 on revenue of $345.15 million.
Shares of Hut 8 traded up about 0.6% to $7.70, in a 52-week range of $2.63 to $16.57. The average daily trading volume is about 11.8 million shares.
Bitfarms Ltd. (NASDAQ: BITF) has a market cap of $1.1 billion, and the stock is up 165% over the past 12 months. The Toronto-based company mined 339 bitcoins in November to bring its year-to-date total to 3,089. Bitfarms had deposited 2,973 bitcoins into its reserves at the end of November. The company’s hashrate was 2.1, and Bitfarms expects to increase that to 3.0 in the first quarter of next year and achieve a hashrate of 8.0 by the end of 2022.
Only one brokerage covers the stock, and that one rates Bitfarms a Strong Buy with a price target of $10. The company’s cash burn for the past 12 months is $159.7 million, with about half that coming in the June quarter. Revenue totals $121.2 million for the past year and net income totaled $7.1 million. For fiscal 2021, the single analyst has estimated revenue at $172.4 million, rising to $244 million in fiscal 2022. EPS for fiscal 2021 is estimated at $0.24, rising to $0.40 in fiscal 2022.
Bitfarms traded down about 0.1%, at $5.09 in a 52-week range of $1.78 to $9.36. The average daily trading volume is about 8.4 million shares.
Hive Blockchain Technologies
Hive Blockchain Technologies Inc. (NASDAQ: HIVE) has a market cap of $1.055 billion, and the stock has added about 38% to its share price in the past 12 months. The Vancouver, B.C.-based company reported November production of 218 bitcoins and 2,334 ether. Bitcoin equivalent production for the month was 389 bitcoins and a hashrate of 2.3.
Hive does not get any coverage from analysts or brokerages, likely due to its low price per share. The company’s 12-month cash burn totals $99.3 million, and the revenue total for the period is $137 million. Net income totaled $104.9 million for the past 12 months. Because there is no coverage on the stock, no estimates are available for the current or next fiscal year.
Hive Blockchain traded up about 1.7% to $2.71, in a 52-week range of $1.74 to $5.75. The average daily trading volume is about 10.8 million shares.
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