Bitcoin(CRYPTO: BTC) has rallied 50% this year as excitement in the crypto world remains high. But not all crypto investments have been doing well. Shares of Marathon Digital (NASDAQ: MARA) and Riot Blockchain (NASDAQ: RIOT) are down more than 15% thus far in 2024.
After strong years in 2023, have these stocks simply run out of steam, or are they potential bargains for crypto investors today?
1. Marathon Digital
Last year was a tremendous one for Bitcoin miner Marathon Digital. Its shares skyrocketed 587% on the cryptocurrency's rising valuation. As one of the largest Bitcoin miners in North America, its operations benefit significantly from higher prices.
This year has been a different story, as Marathon's shares have declined about 18% since January. This comes even as the company has been acquiring more mining sites and adding to its overall capacity, which would increase its dominance and ability to generate significant revenue growth in the future.
In 2023, the company's revenue skyrocketed 229%, with its top line reaching $388 million. Net income of $261.2 million was also impressive, as the company benefited from gains on its digital assets.
During the year, Marathon produced 12,852 bitcoins, up from just 4,144 a year earlier. Things have been overwhelmingly positive for the company of late, and part of the reason for the stock's decline this year may have to do with investors ringing the register and cashing out on some incredible profits.
Marathon's stock doesn't look expensive, trading at 18 times its trailing earnings. But investors shouldn't forget the volatility that comes with the mining company's operations. In 2022, it incurred a net loss of $694 million as impairment charges weighed down its bottom line.
Given the uncertainty in Marathon's future earnings, I wouldn't call the company's stock cheap. But if you can accept the high risk that comes with investing in the stock and want exposure to Bitcoin, this can be a good growth stock to own.
2. Riot Platforms
Another crypto mining stock that has been struggling this year is Riot Platforms. Down about 25%, it has performed even worse than Marathon. In 2023, the stock also did well, achieving gains of 356% for its shareholders.
The company had a strong year in 2023, achieving record revenue of $280.7 million, 8% higher than the $259.2 million it posted a year earlier. Riot Platforms says it benefited from increased Bitcoin production and higher prices. During the year, it produced 6,626 bitcoins, versus 5,554 a year earlier -- a 19% increase.
Riot Platforms is a smaller mining company and more vulnerable to the effects of Bitcoin halving (where Bitcoin mining rewards will be cut in half). It's also not generating nearly as much growth as Marathon, so investors may be less optimistic about its future and current valuation.
The company didn't turn a profit last year despite the high price of Bitcoin, and that could be a concern for investors. Although its net loss shrunk to $49.5 million (versus $509.6 million a year earlier, when impairment charges played a significant role), the lack of profitability is likely a concern for investors, given Bitcoin's current high valuation. It doesn't bode well for the business if Riot isn't profitable at these crypto prices -- and the Bitcoin halving set for next month potentially will make it more difficult to stay out of the red.
Despite its underwhelming performance this year, Riot Platforms stock isn't necessarily a cheap investment to add to your portfolio. Given the company's lack of profitability, you may be better off avoiding the stock entirely.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
