Representing two different ways to invest in Bitcoin (BTC), MicroStrategy (MSTR) and Riot Platforms (RIOT) have skyrocketed this year, mirroring Bitcoin’s price. For reference, the software company MicroStrategy has gained notoriety over the last three years for amassing Bitcoin. Riot has found prominence as a leading Bitcoin mining company that uses its immense fleet of high-end miners to mine BTC. Whereas Riot’s stock has shot up 310% this year, MicroStrategy’s stock has risen over 290%. Nevertheless, determining whether investors should chase either of these high-flying Bitcoin-related stocks is a more nuanced discussion than, perhaps, the numbers suggest.
MicroStrategy Manages Two Separate Businesses
Founded approximately 34 years ago, MicroStrategy is an aging analytics and data mining company at its core. However, over the last twenty years, while it has expanded its ecosystem with additional cloud and mobile services, it has struggled to keep up with larger-growth cloud giants such as Amazon and Microsoft. This is why, between 2010 and 2020, the company’s revenue only grew at a 1% compound annual growth rate (CAGR).
Still, then-CEO and co-founder of MicroStrategy, Michael Saylor, kept an unwavering eye on BTC to USD prices and ultimately drove the company to begin spending on substantial Bitcoin purchases. Since its first notable purchase of $250 million, its BTC holdings have grown to $4.7 billion in its latest quarter. Currently, MicroStrategy holds 158,400 BTC on its balance sheet with an average acquisition price of $29,586. While its current BTC impairment charges have caused it to remain unprofitable over three years, it is expected to return to profitability sooner rather than later.
Riot Platforms is More Straightforward
At one time, Riot was a minuscule patent-holding company called Bioptix. In 2017, the company left its original business model behind in favor of BTC mining. Riot bought tens of thousands of high-end Antminers, and by the end of November, it had deployed an enormous fleet of 112,944 miners. The company has been selling hundreds of Bitcoins monthly to boost its liquidity. However, Riot still holds a market value of $306 million (7,358 BTC) on its balance sheet.
Although its business model is far simpler than MicroStrategy’s, it hinges directly on volatile energy and BTC market prices. While net loss widened in 2022, Riot’s revenue rose to $259 million. Present analytics expect its revenue to increase again by as much as 14%, narrowing its net loss. Its profits could quickly soar if the BTC price rises while inflation dips. Riot should be much cheaper than MicroStrategy, as the former plans to continue selling its excess power back to the grid, effectively stabilizing its long-term operating margins.
Which is the Better Purchase?
Many are leaning toward Riot Platforms as the more sensible investment of the two. Since buying Bitcoin directly might be the best option overall, Riot holds a better model as it’s much more straightforward. Furthermore, Riot has a healthier balance sheet and more stable growth rates. Nevertheless, it is highly recommended to take a deeper look at all options before investing. Both MicroStrategy and Riot Platforms are capital-intensive companies, so keep this in mind if choosing to invest over purchasing BTC directly.
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