Is Jim Cramer Right About RIOT?
For the past few months, there has been a steady drumbeat of bad news about Bitcoin (CRYPTO: BTC) mining stocks. With the price of Bitcoin no longer on the march upward, Bitcoin mining companies are struggling to turn a profit. So it's perhaps no surprise that during the Lightning Round of the Oct. 31 Mad Money show, CNBC host Jim Cramer was unequivocal in his decision not to recommend Riot Blockchain (NASDAQ: RIOT) as a potential buy.
As Cramer pointed out, Riot Blockchain is not making money right now, and he doesn't invest in companies that don't make money. Fair enough. When Riot Blockchain last reported earnings in August, the company posted a loss and failed to meet Wall Street consensus numbers. Despite these setbacks, the company still plans to double the scope of its Bitcoin mining operations by the first quarter of 2023. So is Jim Cramer right about Riot Blockchain or not?
It's important to remember that Riot Blockchain makes money when Bitcoin is rising in price, and struggles to make money when Bitcoin is falling in price. The key reason why Riot Blockchain turned in such an abysmal performance in Q2 2022 was because that time period coincided with a steep fall in the price of Bitcoin and the onset of "crypto winter." Suddenly, every Bitcoin the company mined was worth less in value. When you take into account the massive amount of power needed to run all of the company's Bitcoin mining rigs, it simply became far less profitable to mine Bitcoin.
Source Fool.com
