3 Crypto Stocks to Buy as Bitcoin Surges Once Again
There are several reasons for the sharp rally in bitcoin. First, the cryptocurrency was significantly oversold. Second, relative weakness in the U.S. dollar has been positive for bitcoin. It's also worth noting that another bitcoin halving is expected to occur in April 2024. In the past, halving events have been followed by a big rally. Therefore, there are reasons to believe that bitcoin will continue to trend higher.
Crypto stocks took a beating in 2022. As sentiment in the sector turned bullish in the new year, several crypto stocks have already surged by over 100%. However, I expect multibagger returns for quality crypto stocks even from these levels provided bitcoin remains in an uptrend, which seems likely.
Below are three crypto stocks to buy at current levels.
Coinbase (NASDAQ:COIN) stock has surged 76% year to date. A week ago, however, the stock was up well over 100%. Shares got whacked after the Securities and Exchange Commission (SEC) sent Coinbase a warning that it had identified potential securities violations.
However, if the bullish momentum in bitcoin sustains, so too should the rally in COIN. ARK Invest’s Cathie Wood appears to think this will be the case. She bought millions of dollars worth of COIN shares on the dip.
Coinbase reported a sharp decline in revenue for 2022, along with an adjusted EBITDA loss of $371 million. Total trading volumes declined 50% for the year, while transaction revenue slid 66%. Recovery is likely to be gradual in terms of trading activity gaining traction. However, I like the fact that Coinbase ended 2022 with cash and equivalents of $5.5 billion. This gives the company ample flexibility for product development and international expansion.
Another point worth noting is that Coinbase reported 53% growth in subscription and services revenue in 2022. As the assets held on the company's platform increase in price, blockchain reward and custodial fees are likely to swell. Finally, during the previous bitcoin rally, Coinbase witnessed strong growth in institutional investor activity. That could again prove to be a catalyst for revenue growth and margin improvement.
Riot Platforms (RIOT)
With bitcoin trending higher, there is a strong case for a revival in the fortunes of bitcoin miners like Riot Platforms (NASDAQ:RIOT). The stock looks attractive at current levels around $8 per share despite a 147% year-to-date rally. That’s because the rally is likely to sustain if bitcoin remains in an uptrend.
A big reason to like Riot is the company's fundamental strength. At the end of 2022, Riot reported $230 million in cash and equivalents. With no long-term debt and 7,058 bitcoin on its balance sheet, the financial flexibility is robust.
Another reason to be bullish on Riot is the fact that the company is a low-cost bitcoin producer. In 2022, Riot reported a bitcoin mining gross margin of 60.3%. With the cryptocurrency trending higher, significant margin expansion is in the cards.
It's also worth noting that the company has increased its mining capacity on a sustained basis. As of March, the company reported a hash rate of 9.8 exahashes per second (EH/s). Further, Riot expects to boost mining capacity to 12.5 EH/s in the next few months.
Marathon Digital (MARA)
Marathon Digital (NASDAQ:MARA) is another bitcoin miner that looks poised for multibagger returns. Year to date, MARA stock is higher by 108%. It's worth noting that when bitcoin hit all-time highs, MARA stock was trading around $80. The stock currently trades below $8.
At the end of 2021, Marathon reported an installed hash rate of 3.6 EH/s. Last year, the company boosted its mining capacity to 9.1 EH/s. Marathon continues to project that it will hit 23 EH/s by the middle of the year. Even if the expansion is completed toward the end of 2023, the company is positioned for robust growth.
On the flip side, Marathon reported significant operating losses in 2022. However, that's likely to reverse in the current year as bitcoin trends higher. Further, with significant capacity expansion, digital assets in the balance sheet will swell. This will provide Marathon with ample financial flexibility.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.