Not too long ago, crypto-related stocks were all the rage, riding the wave of Bitcoin’s surge to new heights. The excitement surrounding digital currencies and media attention propelled these stocks to popularity. However, the narrative has shifted in recent times. Despite Bitcoin hovering near crucial resistance levels, signaling a potential breakout, crypto stocks have taken a backseat. This begs the question: have these once-popular crypto stocks lost their value and hype, or should investors remain vigilant? Let’s delve into the performance of two prominent crypto-related stocks, Marathon Digital (MARA) and Riot Platforms (RIOT), and compare them to Bitcoin’s recent moves.
While Bitcoin has traded mostly sideways for the past six months, exhibiting an 8.7% decline, it remains up 143% over the past year and 44% YTD. Despite its recent consolidation near its all-time highs near $73,000, a level that could spark a significant upward move if breached, media interest has waned. One possible explanation for the diminished interest in crypto-related stocks is the emergence of Bitcoin ETFs, such as the iShares Bitcoin Trust (IBIT). These ETFs offer direct exposure to Bitcoin, attracting investors who might have previously sought exposure through mining stocks.
So, how have these popular Bitcoin mining stocks performed compared to Bitcoin itself? Marathon Digital Holdings (MARA), a prominent player in the mining space, has faced challenges during Bitcoin’s recent consolidation. While Bitcoin has declined by 8.7% over the past six months, MARA’s share price has plunged over 20% during the same period and is down more than 30% YTD. The company’s recent earnings miss further fueled the sell-off. On August 1st, 2024, Marathon Digital reported a quarterly loss of ($0.72) per share, significantly worse than the expected ($0.23). Revenue also fell short, reaching $145.14 million versus an expected $157.86 million.
Despite this underwhelming performance, analysts maintain a relatively optimistic outlook, with a consensus Hold rating and a price target of $19.61, suggesting a potential upside of 21.5%. However, with MARA underperforming Bitcoin and reporting weak earnings, a Bitcoin rally might not be enough to reverse its current downtrend.
Riot Platforms, another major Bitcoin mining company, has experienced a similar fate. Over the past six months, RIOT’s stock has dropped nearly 40%, down 60% from its 52-week high. The company’s latest earnings report, released on July 31st, 2024, showed a loss of ($0.32) per share, double the expected ($0.16) loss. Riot’s revenue also slightly missed expectations, reaching $70 million, down 8.7% year-over-year. Despite these struggles, analysts remain bullish, with a Buy consensus and a price target of $16.60, implying more than 100% potential upside.
While this might make RIOT seem like a bargain, the stock’s significant underperformance compared to Bitcoin suggests that a Bitcoin breakout alone might not be enough to turn things around.
Marathon Digital and Riot Platforms have significantly underperformed Bitcoin, even though the cryptocurrency is holding near crucial levels. While analysts remain optimistic about their long-term potential, the current weakness in earnings and stock price momentum raises concerns. Investors eyeing these names should keep a close watch on Bitcoin’s price action, but as the saying goes, “it’s never good to try and catch a falling knife.” These stocks might require more than a Bitcoin breakout to regain strength.
