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Marathon, Riot among most overvalued Bitcoin mining stocks: Report

Marathon, Riot among most overvalued Bitcoin mining stocks: Report

According to MinerMetrics founder and analyst Jaran Mellerud, Marathon Digital and Riot Platforms are considered among the most overvalued crypto mining companies relative to their competitors. The key metric supporting this claim is the enterprise value-to-sales ratio, which measures a company’s value in relation to its sales revenue. The higher the ratio, the more overvalued the company is.

Based on Mellerud’s report, the miners with the highest EV/S ratios are Cipher at 7.8, Marathon and Iris Energy at 5.6 each, and Riot at 5.5.

Mining stocks valuation in terms of EV-to-Sales ratio. Source: MinerMetrics

Mellerud attributed the high EV/S ratios of these companies to receiving more institutional attention from the likes of BlackRock. He stated, “These companies have historically been favored among institutional investors like Blackrock and Vanguard, giving them superior access to capital and higher valuations like the rest of the industry.”

Mellerud expects investors to start allocating to other players in the coming months, which could potentially even out the valuation discrepancies between these stocks. He suggested that there are better-priced opportunities with lower EV/S ratios that could be capitalized on.

Another indicator pointing towards Riot’s overvaluation is its high EV-to-Hashrate ratio at 156, according to Mellerud.

Mining stocks valuation in terms of EV-to-Hashrate ratio. Source: MinerMetrics

Mellerud also noted Riot’s “massive growth” priced in, as it’s constructing its a gigawatt site and awaits the delivery of 33,000 MicroBT machines in early 2024. He added, “In addition, Riot has several business lines that are not reflected in its self-mining hashrate, meaning we should be careful in drawing any valuation conclusions from its high EV-to-Hashrate ratio.”

The Bitcoin mining sector has shown significant rebound in 2023, with Marathon Digital (MARA) and Riot Platforms (RIOT) leading the way with their respective share prices increasing by 170% and 228%, as reported by Google Finance. These mining stocks have outperformed Bitcoin, which has gained 113% year-to-date according to Cointelegraph Markets Pro data.

Not all mining analysts believe that Bitcoin mining stocks will continue to rise. Caleb Franzen, founder of Cubic Analytics, pointed out that Bitcoin already reached its year-to-date peak price, while the top mining stocks are still over 75% off year-to-date price highs. Franzen also considered whether Bitcoin mining firms will soon need to become twice as productive in light of the upcoming Bitcoin halving event, stating, “If block rewards are cut in half, the price of BTC would need to double post-halving in order for their business to be just as sustainable as it was pre-halving.”

Among the Bitcoin mining companies, Marathon holds the largest Bitcoin holdings with 13,726 BTC, worth $486.1 million. Hut 8, Riot, and CleanSpark follow with respective holdings of 9,366 BTC, 7,309 BTC, and 2,240 BTC.

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