The total number of cryptocurrency users globally were 106 million as of January 2021. The surge in number of global users has been unprecedented in the last few months. Thus, this rise has cause a number of crypto stocks to be a hot commodities for investors.
In June 2021, the crypto users globally more than doubled to 221 million. Clearly, adoption of Bitcoin (CCC:BTC-USD) has been growing at a stellar pace with big participation coming from institutional investors.
From a price action perspective, the worst seems to be over for Bitcoin. The cryptocurrency has been trading higher with rising adoption being one factor. Furthermore, Tesla (NASDAQ:TSLA) is likely to start accepting Bitcoin again as a payment method. With real interest rates remaining negative in most parts of the world, Bitcoin is likely to witness sustained fund inflow.
One way for exposure to the world of cryptocurrencies is through crypto stocks. There are listed companies involved in the mining of Bitcoin and Ethereum (CCC:ETH-USD). Additionally, decentralized finance promises to be big in the coming years. Crypto companies are likely to diversify beyond just mining.
Therefore, with growth at an inflection point, it’s a good idea to have some crypto stocks in your portfolio. Thus, let’s talk about four crypto stocks that look interesting from a medium to long-term investment perspective.
Marathon Digital (NASDAQ:MARA) Riot Blockchain (NASDAQ:RIOT) Coinbase (NASDAQ:COIN) Robinhood (NASDAQ:HOOD)
Now, let’s dive in and take a closer look at each one.
Crypto Stocks to Buy: Marathon Digital (MARA)
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MARA stock has surged by 194% in 2021, and looks good for further upside. The Bitcoin mining company is positioned for strong revenue growth in the next few years as it aggressively acquires miners.
Recently, the company reported second-quarter results for 2021 and revenue surged by 10,147% year-over-year (YOY) to $29.3 million. For the quarter, the company mined a total of 654 Bitcoins with 19,395 miners deployed.
The key point to note is that Marathon expects to increase the number of miners to 103,120 by Q1 2022. This would represent 6.4% of the global Bitcoin hash rate. Therefore, as the number of miners increase, the company is positioned for sustained growth.
Once all miners are deployed, the company expects to deliver revenue of $94.4 million per month at $55,000 Bitcoin. This would imply an annualized revenue in excess of $1 billion.
It’s also worth noting that as of Q2 2021, the company reported cash and equivalents of $170.6 million. Furthermore, the value of cash and Bitcoin holdings was $366.5 million. This gives the company ample financial headroom to pursue growth even beyond the current expansion plan.
Overall, MARA stock is among the one of the most attractive crypto stocks — and fresh exposure can be considered at current levels.
Riot Blockchain (RIOT)
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After a massive rally in the last 12 months, RIOT stock has seen some consolidation as of late. A renewed rally seems likely with the company having ambitious growth plans.
Currently, Riot Blockchain has a total hash rate capacity of 1.6 EH/s. The company plans to ramp-up capacity of 7.7 EH/s by Q4 2022.
It’s worth noting that for Q1 2022, the company mined 5.46 Bitcoin in a daily basis. Given the expansion plans, the company is well positioned to mine 20 to 25 Bitcoins on a daily basis. This would imply a five-fold revenue growth in the next 12-18 months.
For Q1 2021, Riot reported revenue of $23.2 million. For the same period, the company’s adjusted EBITDA was $10.3 million. This implies an EBITDA margin of 44%. With the coming expansion, the company is positioned for healthy EBITDA and cash flows.
Riot also reported cash and Bitcoin value of $275.6 million as of Q1 2022. Additionally, the company had zero debt. Therefore, there is ample financial flexibility to fund the growth plan.
I would not be surprised if Riot pursues acquisition drive growth once the current expansion plan is completed. Therefore, RIOT stock is among the quality crypto stocks to consider for the medium to long-term.
Crypto Stocks to Buy: Coinbase (COIN)
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After a stellar listing and highs of $429, COIN stock has been in a correction and consolidation mode. At a forward price-earnings (P/E) ratio of 21.98, the stock looks attractive. A break-out on the upside seems imminent with rising adoption of cryptocurrencies
Talking about the rising adoption, global crypto users had surged past 100 million earlier this year. Within four months, the number of crypto users doubled to 221 million. Clearly, this is a big positive for Coinbase.
Specific to Coinbase, the retail trading volume on the platform was $11 billion in Q2 2020 and it surged to $145 billion in Q2 2021. For the same period, the institutional trading volume increased from $17 billion to $317 billion. Therefore, there has been wide adoption among institutional investors.
Another important point from the financial perspective is the company’s reported EBITDA of $1.2 billion for Q2 2021. This would imply an annualized EBITDA of $4.8 billion.
The company also reported operating cash flow of $2.2 billion (excluding custodial funds due to customers) for the first half of 2021. Therefore, Coinbase seems positioned to generate robust free cash flows in the coming years.
It seems like a good opportunity to accumulate COIN stock at current levels. The company’s asset-light business is likely to be a cash flow machine as crypto users continue to increase at a healthy pace.
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HOOD stock has witnessed significant volatility after the initial public offering (IPO). However, the stock looks good for the long-term with the company on a high-growth trajectory.
Currently, Robinhood offers trading and investment options for stocks, funds, gold and cryptocurrencies. Therefore, the offering is more diversified.
On the flip-side, the company’s presence in just in the United States. However, it seems very likely that Robinhood will pursue expansion in international markets in the coming years.
According to the company’s prospectus, Robinhood had 17.7 million monthly active customers with $81 billion in assets under custody. It’s also worth noting that the company’s average revenue per user (ARPU) was $37 in 2017. However, for 2020, the ARPU has increased to $108.9. Sustained growth in ARPU points to healthy EBITDA margin and cash flows in the coming years.
In terms of top-line growth, Robinhood reported revenue of $959 million for 2020. YOY, revenue was higher by 245%. Clearly, the company is on a robust growth trajectory. This makes HOOD stock attractive.
Specific to cryptocurrencies, Robinhood reported assets under custody (AUC) of $481 million as of March 2020. The total crypto assets under custody increased to $11.6 billion as of March 2021. The growth has been stellar and considering the rate of cryptocurrency adoption, AUC will continue to witness strong growth.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.