Everyone is raving about blockchain technology due to its decentralized nature, wide application, and security. And companies working on this technology have been developing successfully in recent years. However, as macro concerns continue to impact the stock market, fundamentally weak blockchain stocks Block (SQ), Marathon Digital (MARA), and Riot Blockchain (RIOT) are expected to remain under pressure. So we think it might be wise to avoid them. Continue reading….
Blockchain is known as the technology behind Bitcoin and other major cryptocurrencies and digital assets. It’s a form of ledger technology that stores records in a decentralized manner, making it difficult or impossible to change. The technology has attracted attention because of the security it offers. And companies opening in the blockchain space have thrived in recent years.
Unfortunately, the stock and crypto markets have been under significant pressure since the beginning of the year, leading to sell-offs in blockchain stocks. The Fed’s multiple rate hikes this year have done little to stem rising inflation. With inflation still near multi-decade high levels, the Fed is expected to announce more aggressive rate hikes in a bid to curb inflation.
Due to the Fed’s restrictive monetary policy, the stock market is likely to remain under pressure in the coming months. The riskier cryptocurrency space is also likely to come under pressure as many experts believe the downtrend in cryptos is here to stay.
Although blockchain has several other uses besides powering cryptocurrencies and digital assets, if cryptocurrencies continue to decline, blockchain stocks will continue to be affected.
With that in mind, we think it’s prudent to review fundamentally weak blockchain stocks Block, Inc. (Q), Marathon Digital Holdings, Inc. (MARA) and Riot Blockchain, Inc. (REVOLT).
Block, Inc. (Q)
SQ is a technology company that develops tools that enable sellers to accept card payments and provide reporting, analytics and next-day billing. The company focuses on financial services. Also, its building block includes Square, Cash App, Spiral, TIDAL, and TBD54566975.
SQ’s total net revenue for the second quarter ended June 30, 2022 decreased 5.9% year-on-year to $4.40 billion operating loss was $213.77 million compared to operating income of $124.99 million in the same period last year.
In addition, net loss was $208.01 million compared to net income of $204.02 million in the same period last year. Additionally, loss per share was $0.36 compared to earnings per share of $0.40 in the year-ago period.
Analysts expect SQ’s earnings per share to decrease 35.1% year-on-year to $0.24 for the quarter ended September 30, 2022. Revenue for fiscal 2022 is expected to decline 0.3% year over year to $17.61 billion. Over the past year, the stock is down 75% to close the last trading session at $63.71.
SQ’s weak fundamentals are reflected in its POWR ratings. The stock has an overall rating of D, which equates to a Sell in our proprietary rating system. The POWR ratings are calculated considering 118 different factors, with each factor being optimally weighted.
It has a D grade for stability, tuning and quality. It is ranked 90th out of 106 F-rated stocks Financial Services (Corporate) Industry. click here to see SQ’s other ratings for Growth, Value and Momentum.
Marathon Digital Holdings, Inc. (MARA)
MARA is a digital asset technology company primarily focused on cryptocurrency mining in the blockchain ecosystem and operates as a digital asset generator in the United States
MARA revenue decreased 15% year-on-year to $24.92 million for the second quarter ended June 30, 2022. Operating loss increased 61.6% year over year to $178.21 million. The company’s net loss rose 76% year over year to $191.65 million. Loss per share also rose 60.5% year over year to $1.75.
Analysts expect MARA’s loss per share for the current quarter to rise 81.8% year-on-year to $0.40. Revenue for the quarter ended September 30, 2022 is expected to decrease 41.3% year-on-year to $30.34 million. It failed to beat consensus EPS estimates in each of the last four quarters. Over the past year, the stock is down 69.7% to close the last trading session at $10.87.
MARA’s POWR ratings reflect this bleak outlook. It has an overall rating of F, resulting in a strong sell in our proprietary rating system.
It has an F grade for Growth, Value, Stability, Mood and Quality. To see MARA’s rating for Momentum, click here.
Riot Blockchain, Inc. (REVOLT)
RIOT is involved in cryptocurrency mining and the overall blockchain system through various investments. The company has deployed approximately 8,000 application-specific integrated circuit miners at its Oklahoma cryptocurrency mining facility. In addition, subsidiary Tess Inc. aims to develop a blockchain-based escrow service for wholesale telecom providers.
For the second fiscal quarter ended June 30, 2022, RIOT’s net loss was $366.33 million compared to a net income of $19.33 million. Adjusted EBITDA loss was $65.17 million compared to Adjusted EBITDA of $2.38 million. The company’s adjusted loss per share was $0.50 compared to adjusted earnings per share of $0.03.
For the current quarter, RIOT’s EPS is expected to remain negative. It has failed to beat street EPS estimates in three of the last four quarters. Over the past year, the stock lost 77.7% to close the last trading session at $6.52.
RIOT’s weak prospects are reflected in its POWR ratings. It has an overall rating of F, which equates to a strong sell in our proprietary rating system.
It has an F grade for stability, mood and quality and a D for value. It is ranked 79th out of 81 stocks in the ranking Technology – Services Industry. click here to see RIOT’s other growth and momentum ratings.
SQ shares traded at $61.63 per share on Tuesday morning, down $2.08 (-3.26%). Year-to-date, SQ is down -61.84% versus a -18.67% rise in the benchmark S&P 500 over the same period.
About the author: Dipanjan Banchur
Ever since he was in elementary school, Dipanjan was interested in the stock market. This led to a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in the financial markets.
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