Is Riot Platform stock an easy buy after posting record numbers?

riot platform (riot -10.51%) It’s one of the best Bitcoin Mining companies you can invest in today. However, the stock has struggled so far and is down 30%. However, the company recently announced impressive revenue numbers, even posting a healthy profit. Could Riot Platform be an undervalued stock to buy right now?

The company posted record numbers in the first quarter.

On May 1, Riot Platforms announced its earnings results for the first three months of 2024. For the period, the company reported revenue of $211.8 million, a new quarterly record for the business. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $245.7 million, another record high.

However, it is important to note that these results are primarily due to changes in fair value. For Bitcoin mining companies, profits and losses can play a significant role in whether or not the business is profitable. For example, last quarter, changes in Bitcoin’s fair value had a positive impact of $234.1 million on Riot’s operations, significantly higher than all other expenses. Bitcoin mining costs of $41.1 million were up 88% year-over-year, and selling, general and administrative expenses totaling $57.7 million were more than four times the $12.7 million Riot reported for those items a year ago.

It’s true that Riot had record-breaking performance in the first quarter, but you could call this a low-quality return in the sense that it might not prove sustainable or consistent. If profits and losses can be the difference between profits and losses in a company’s finances, this leads to a lot of volatility from period to period. The company’s operating profit last quarter was $203.9 million, compared to $17.4 million a year ago.

And just because the value of Bitcoin rises, that doesn’t mean Riot’s stock will generate big returns for investors. This may have been the case in the past, but things may be different in the future.

Riot’s stock and Bitcoin recently diverged.

Over the past few years, Riot’s stock has followed a similar path to Bitcoin. Mining companies benefit from rising cryptocurrency prices. Therefore, it is not surprising that as the value of digital currencies rises, so does the value of top mining companies like Riot. But recently things have begun to change.

RIOT data from YCharts

The recent Bitcoin halving event may be the reason for this difference. That’s because investors know Riot will need more than a high price to help it generate strong numbers in the future. Now that mining rewards have been halved, the company must become more efficient.

Riot is expanding its business

Riot has been investing in increasing the hash rate, which could help it mine more Bitcoin. In the company’s latest earnings call, management stated that its mining hash rate capacity will reach 31 exahashes per second by the end of this year. This is almost three times the existing hash rate capacity. The company said its Corsicana facility “will be the world’s largest dedicated Bitcoin mining facility when fully developed.”

But the problem is that these efforts will inevitably cost Riot more money as it spends money on infrastructure and adds more employees. The company will need to increase capacity so it can mine more Bitcoin to offset the effects of the halving. But at the same time, day-to-day operating costs will increase, making it more difficult to maintain a surplus.

Is Riot Platforms a good stock to buy?

Riot Platforms’ recent results have been impressive, but they may not be sustainable. That’s why investors should exercise some caution when it comes to stocks. This is because the coming quarters could be very different, especially as the company begins to feel the effects of halving and receiving Bitcoin from its mining efforts.

Crypto stocks may seem cheap right now, but investors are better off just watching Riot’s platform rather than investing in it. There is still too much risk in the business to be anything more than a speculative stock.