Are Crypto Stocks Still Worth Watching as Bitcoin Consolidates?

Key Points

• Crypto-related stocks, such as Marathon Digital and Riot Platforms, surged alongside Bitcoin's previous highs but have since lost momentum as Bitcoin consolidates near critical levels.
• While Bitcoin has traded sideways, Marathon Digital and Riot Platforms have significantly underperformed, with MARA down over 20% and RIOT down nearly 40% in the last six months.
• Despite weak earnings and stock declines, analysts remain optimistic about both stocks' long-term potential.

Not too long ago, crypto-related stocks generated buzz as Bitcoin surged to new heights. These stocks gained significant popularity due to the excitement surrounding digital currencies and media attention. However, in recent times, crypto stocks have become less of a focus, even as Bitcoin hovers near crucial resistance levels, signaling a potential breakout.

So, is the value and hype no longer present in these once-popular crypto stocks? Or should investors keep them on their radar, even though the excitement seems to have diminished?

Let’s examine two prominent crypto-related stocks and their performance compared to Bitcoin’s recent moves.

Bitcoin’s Recent Performance: Stable Consolidation Near Key Levels

While Bitcoin has traded mostly sideways for the past six months, showing an 8.7% decline during this period, it remains up 143% over the past year and 44% YTD. Although its recent consolidation near its all-time highs near $73,000 has subdued media interest, this major breakout level could spark a significant upward move if breached.

One potential reason for less interest in crypto-related stocks could be the rise of Bitcoin ETFs, like the iShares Bitcoin Trust NASDAQ: IBIT. These ETFs offer direct exposure to Bitcoin, potentially attracting investors who might have previously invested in mining stocks for their crypto exposure. But how have some of the more popular Bitcoin mining stocks performed compared to Bitcoin itself?

MARA Enters Bear Market After Earnings Miss

Marathon Digital Holdings NASDAQ: MARA, a significant player in the mining space, struggled during Bitcoin’s recent consolidation. While Bitcoin is down 8.7% over the past six months, MARA’s share price has plunged over 20% during that same period and is down more than 30% YTD.

The company’s recent earnings miss only added to 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 the poor performance, analysts remain relatively optimistic, 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, it may take more than a Bitcoin rally to reverse its current downtrend.

RIOT’s Stock Plunges 60% From 52-Week High

Riot Platforms NASDAQ: RIOT, 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 maintain a bullish outlook, 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 it may take more than a Bitcoin breakout to turn things around.

Cautious Optimism: Analysts See Potential for Marathon and Riot Recovery

Marathon Digital and Riot Platforms have dramatically underperformed Bitcoin, even though the cryptocurrency holds near crucial levels. While analysts remain optimistic about their long-term potential, the current weakness in earnings and stock price momentum raises caution. 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 may require more than a Bitcoin breakout to regain strength.