Riot Blockchain Inc (NASDAQ: RIOT) has garnered quite a bit of attention this year. Following Bitcoin upward, the stock has climbed over 200% so far this year. Considering the dramatic gains, there’s a strong argument that this run is over and it’s time to take your profits and move on.
But is the run over? What’s the next big move?
In my view, RIOT is highly overvalued and ready for a bearish reversal. At the same time, Mogo Inc (NASDAQ: MOGO) is emerging as a leader in Canadian FinTech and provides much safer exposure to Bitcoin-related gains. Here’s how I see it:
The RIOT Stock Run Is Coming To An End
As mentioned above, Riot Blockchain has had an incredible run year to date. Nonetheless, in my view, the run is coming to an end. The fact of the matter is that the stock is highly overvalued, which became very clear with their earnings release earlier this week.
The fact of the matter is that Riot Blockchain is blowing through money, and while the company is generating a few million in revenue per quarter, it’s actually losing massive amounts of money on the net.
This only serves to validate an opinion posted by Hindenberg Research in early June, suggesting that in order for Riot Blockchain to reach profits, Bitcoin would have to climb to $18,000. At the same time, Hindenburg pointed out that RIOT has nothing proprietary and duplicating the company’s activities would only cost about $12 million to do, a far cry from the company’s current market cap of more than $160 million.
The fact of the matter is that RIOT has been being snapped up by investors hoping to gain exposure to the recent run in the value of bitcoin, causing a vast overvaluation of a company that really has little to offer.
Nonetheless, if you took the ride since the beginning of the year, you’re enjoying great profits. It’s time to cash out and look elsewhere. I strongly suggest looking at Mogo.
Why MOGO Stock Should Be On Your Radar
So, you’ve made a killing with Riot Blockchain. Great job. Now it’s time to send that money out to work for you again. Mogo is a great place to look, especially if you want to maintain exposure to the recent run in Bitcoin, but with far lower risk than what you would experience investing in Riot Blockchain.
MOGO is nothing like RIOT. Instead, it’s more like the Square (NASDAQ: SQ) Cash App. The company offers access to bitcoin along with a full suite of financial services through an intuitive app that is increasingly being called the Square Cash App of Canada.
Mogo makes Bitcoin available through MogoCrypto, a feature of the Mogo App, it also provides digital banking services linked to a MogoSpend Platinum Visa card that allows users to better control their finances while improving the health of the global environment. The company also offers a suit of lending and other products designed to improve financial health.
When comparing valuations between MOGO and RIOT, the opportunity becomes very clear. During the most recent quarter, Riot only generated revenue of about $1.9 million, that’s less than 25% of the $8 million MOGO reported for the second quarter. Not to mention, Mogo reported 49% EBITDA margin on that revenue. However, Riot Blockchain trades with a market cap that’s about three times that of MOGO.
It’s also worth mentioning that Mogo generated cash flow of $5.5 million in the second quarter while increasing its user base by around 20%, now providing services to more than 1 million members.
At the same time, Mogo has a real company with proprietary technology that gives it a competitive advantage and ability to grow to profit, regardless of what happens with Bitcoin.
The Bottom Line
The bottom line here is simple, the run in the value of Riot Blockchain has been highly overblown, and as a result, the stock is extremely overvalued. Now, it’s time to start taking profits and looking for other growth opportunities.
Mogo is the picture of the opportunities that you should be looking for. The company is on the verge of profits, highly undervalued when compared to its peers, and has been experiencing a sharp increase in liquidity.
While providing exposure to Bitcoin, the company also has a highly diverse product offering, helping to protect your investment from any reversal that may take place in the cryptocurrency.
An investment in the stock is also supported by four credible research firms, including Raymond James, who recently initiated coverage on the stock with a CA$4 price target, suggesting serious gains to come.
With everything falling in line for MOGO, the stock has the potential to be the next big fintech play to return gains in multiples.
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