Everyone is raving about blockchain technology due to its decentralized nature, wide application, and security. And companies working on this technology have thrived over the past several years. However, as macroeconomic concerns continue to affect the stock market, fundamentally weak blockchain stocks Block (SQ), Marathon Digital (MARA), and Riot Blockchain (RIOT) are expected to remain under pressure. Therefore, we think it could be wise to avoid them. Read on….
shutterstock.com – StockNews Blockchain is well known as the technology behind Bitcoin and other major cryptocurrencies and digital assets. It is a form of ledger technology that stores records in a decentralized manner, making it difficult or impossible to alter. The technology has gained attention due to the security it provides. And companies opening in the blockchain space thrived over the past several 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 several interest rate hikes this year have not had much effect in curbing the rising inflation. With inflation still near multi-decade high levels, the Fed is expected to announce further aggressive interest rate hikes to curb inflation.
Due to the Fed’s hawkish monetary stance, the stock market is expected to remain under pressure in the upcoming months. The riskier cryptocurrency space is also likely to be under pressure, with many experts believing that the downtrend in cryptos will continue for a long time.
Although blockchain has several applications other than powering cryptocurrencies and digital assets, blockchain stocks will continue to be affected if cryptocurrencies decline further.
Amid this backdrop, we think it could be wise to avoid fundamentally weak blockchain stocks Block, Inc. (SQ), Marathon Digital Holdings, Inc. (MARA), and Riot Blockchain, Inc. (RIOT).
Block, Inc. (SQ)
SQ is a technology company that creates tools that enable sellers to accept card payments and provide reporting, analytics, and next-day settlement. The company focuses on financial services. Also, its building block comprises Square, Cash App, Spiral, TIDAL, and TBD54566975.
SQ’s total net revenue declined 5.9% year-over-year to $4.40 billion for the second quarter ended June 30, 2022. The company’s operating loss came in at $213.77 million, compared to an operating income of $124.99 million in the year-ago period.
Also, its net loss came in at $208.01 million, compared to a net income of $204.02 million in the year-ago period. In addition, its loss per share came in at $0.36, compared to an EPS of $0.40 in the year-ago period.
Analysts expect SQ’s EPS for the quarter ending September 30, 2022, is expected to decline 35.1% year-over-year to $0.24. Its revenue for fiscal 2022 is expected to decline 0.3% year-over-year to $17.61 billion. Over the past year, the stock has declined 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 D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a D grade for Stability, Sentiment, and Quality. It is ranked #90 out of 106 stocks in the F-rated Financial Services (Enterprise) industry. Click here to see the other ratings of SQ for Growth, Value, and Momentum.
Marathon Digital Holdings, Inc. (MARA)
MARA is a digital asset technology company focused primarily on mining cryptocurrencies in the blockchain ecosystem and operates as a digital asset generator in the U.S.
MARA’s revenues declined 15% year-over-year to $24.92 million for the second quarter ended June 30, 2022. Its operating loss widened 61.6% year-over-year to $178.21 million. The company’s net loss widened 76% year-over-year to $191.65 million. Also, its loss per share widened by 60.5% year-over-year to $1.75.
Analysts expect MARA’s loss per share for the current quarter is expected to widen 81.8% year-over-year to $0.40. Its revenue for the quarter ending September 30, 2022, is expected to decline 41.3% year-over-year to $30.34 million. It failed to surpass the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has fallen 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, which translates to a Strong Sell in our proprietary rating system.
It has an F grade for Growth, Value, Stability, Sentiment, and Quality. To see the rating of MARA for Momentum, click here.
Riot Blockchain, Inc. (RIOT)
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 cryptocurrency mining facility in Oklahoma. In addition, its subsidiary Tess Inc. seeks to develop a blockchain-based escrow service for wholesale telecom carriers.
For the fiscal second quarter ended June 30, 2022, RIOT’s net loss came in at $366.33 million, compared to a net income of $19.33 million. Its adjusted EBITDA loss came in at $65.17 million, compared to an adjusted EBITDA of $2.38 million. The company’s adjusted loss per share came in at $0.50, compared to an adjusted EPS of $0.03.
For the current quarter, RIOT’s EPS is expected to remain negative. It failed to surpass Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has 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 F rating, equating to a Strong Sell in our proprietary rating system.
It has an F grade for Stability, Sentiment, and Quality and a D for Value. It is ranked #79 out of 81 stocks in the Technology – Services industry. Click here to see the other ratings of RIOT for Growth and Momentum.
SQ shares were trading at $61.63 per share on Tuesday morning, down $2.08 (-3.26%). Year-to-date, SQ has declined -61.84%, versus a -18.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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