US stocks faced significant selling pressure Thursday afternoon, driven by disappointing economic data and a sharp decline in chip stocks. This led to losses across all three major indexes, following the Federal Reserve’s indication of a likely rate cut in September.

The S&P 500 declined nearly 1.5%, and the Nasdaq Composite reversed its earlier gains, falling almost 2.5% after a strong close on Wednesday. The Dow Jones Industrial Average saw a drop of nearly 600 points, or 1.4%.

If this trend continues, it could mark the worst day of the year for the market.

Entering the week, investors were closely monitoring Big Tech earnings. 

Microsoft and AMD kicked off the announcements with decent earnings reports. 

Despite a slowdown in growth for Microsoft, the company’s commitment to AI spending provided some optimism. 

META followed with impressive results, keeping its stock up 5% despite the broader market crash.

However, the tech sector did not perform as poorly as anticipated. So, what is causing the market turmoil?

What’s causing the crash?

The latest economic data released today reignited fears of a recession. Jobless claims surged the most since August last year, compounding concerns when the ISM Manufacturing Index reported a disappointing 46.8%, indicating economic contraction. 

This spooked investors, pushing the 10-year Treasury yield below 4%.

Federal Reserve Chair Jerome Powell’s recent announcement that interest rates would remain unchanged, with a potential rate cut in the near future, also contributed to market anxiety. Investors now fear the Fed may have misjudged the economic situation.

Economic data continues to point towards a downturn, if not a full-blown recession. The stock market is in a state of confusion as it grapples with the possibility of three Fed rate cuts this year and 10-year bond yields falling below 4.00%.

“The winds of recession are blowing hard,” said Chris Rupkey, Economist. “The stock market doesn’t know whether to laugh or cry.”

Should investors be worried?

It is challenging to determine whether this situation resembles a recession or the dot-com bubble. 

Tech stocks have been pivotal in elevating the market, but their high valuations have always been justified by their performance. 

However, there is a growing sentiment that tech stocks cannot sustain their previous year’s momentum indefinitely.

“There is an implicit expectation of lower performance from megacaps now than in 2000,” stated GMO portfolio managers. “In a real sense, the stakes are lower today.”

While high tech valuations are not the primary cause of the current market crash, poor earnings from tech companies could exacerbate the situation. Apple is set to announce its quarterly earnings after market close today, and a disappointing performance could complicate matters further.

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Roblox Corp (NYSE: RBLX) is seeing a premarket boost on Thursday after reporting impressive financial results for its second quarter, showcasing a 21% year-on-year increase in daily active users (DAUs). This strong performance signals a broader rebound in the gaming industry.

In Q2, Roblox narrowed its loss to 32 cents per share and saw a 31% increase in revenue, reaching $893.5 million. 

Analysts had predicted losses at 37 cents per share and revenue of $898 million. The company ended the quarter with 79.5 million DAUs, up from 65.7 million a year ago and exceeding the expected 76.39 million. This surge in user engagement highlights Roblox’s growing influence in the gaming sector.

Robust user engagement boosts Roblox’s performance

Roblox reported a total loss of $206 million for the quarter, a significant improvement from the $283 million loss the previous year. 

The company’s bookings rose by 22% year-over-year to $955 million, surpassing analyst expectations of $897 million.

David Baszucki, CEO of Roblox Corp, highlighted the company’s success, stating, “The dynamic Roblox content ecosystem is unique and continues to attract users of all ages from across the globe. Going forward, we will continue to invest in our core platform to help our creator community build better and safer experiences and reach more people.”

Roblox’s second quarter also saw a 24% increase in hours engaged, totaling 17.4 billion hours. 

This underscores the popularity of the diverse, high-quality content on its platform. Wall Street analysts currently rate Roblox stock as “overweight” on average, reflecting confidence in its future growth.

Roblox gains on upbeat guidance

Roblox slightly improved its average booking per user to $12.01 in the second quarter and forecasts bookings of up to $4.23 billion for 2024. 

Despite the positive Q2 performance, the company’s full-year forecast for adjusted EBITDA and revenue, set at $92 million to $132 million and $3.49 billion to $3.54 billion respectively, fell short of the $4.08 billion revenue forecast by experts.

The rise in Roblox’s stock price is noteworthy, especially given the modest full-year forecast. 

Market analyst Ritesh A. predicted in June that if bullish momentum continued, Roblox stock could reach $50 in the coming months. 

Currently, RBLX is trading at $45. However, it remains less attractive for income investors as it does not pay a dividend.

Roblox’s strong Q2 earnings report, marked by significant growth in daily active users and improved financial performance, underscores a promising rebound in the gaming industry. 

With continued investment in its platform and a focus on user engagement, Roblox is well-positioned for future growth despite some conservative full-year forecasts. 

The company’s innovative approach and expanding user base make it a key player to watch in the evolving gaming landscape.

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In a dramatic turn of events, shareholders of cybersecurity giant CrowdStrike have filed a class-action lawsuit against the company. 

The lawsuit alleges that CrowdStrike made “false and misleading” statements about its software testing processes, leading to a catastrophic IT outage that affected over eight million computers worldwide. 

This incident has not only raised questions about the company’s software integrity but also led to significant financial repercussions.

Did CrowdStrike executives mislead investors?

Filed in the federal court in Austin, Texas, the lawsuit claims that CrowdStrike executives misled investors by assuring them that the company’s software updates were thoroughly tested. 

Central to the complaint are statements made by CEO George Kurtz during a March 5 conference call, where he claimed the firm’s software was “validated, tested, and certified.”

Shareholders are seeking compensation for the substantial financial losses they incurred, pointing to a 32% drop in CrowdStrike’s share price following the incident. 

This drop equated to a staggering $25 billion loss in market value. 

The proposed class action aims to recover unspecified damages for investors who held shares between November 29 of the previous year and July 29.

CrowdStrike has denied the allegations and stated its intention to vigorously defend itself against the lawsuit. 

“We believe this case lacks merit, and we will vigorously defend the company,” said CrowdStrike in a statement.

The outage resulted in $5.4 billion in losses

The faulty software update, which occurred on July 19, led to widespread disruptions across various sectors, including airlines, banks, and hospitals. 

According to cloud risk firm Parametrix, the outage resulted in $5.4 billion in direct losses.

The healthcare sector suffered the most, with a $1.9 billion loss, while the banking industry incurred a $1.4 billion loss. Companies in each industry are estimated to have averaged a loss of $43.6 million each. 

Delta Air Lines was among the hardest hit, with CEO Ed Bastian reporting a $500 million loss due to grounded flights and passenger compensation. 

Spirit Airlines also anticipated a $7.2 million hit to its third-quarter operating income due to the outage, which forced the carrier to cancel 470 flights.

CrowdStrike acknowledged the issue, attributing the crash to a “bug” in a system designed to ensure the proper functionality of software updates. 

The company has since stated that the affected computers were restored to normal as of 5 PM local time on July 29, ten days after the initial incident.

In response to the lawsuit, CrowdStrike emphasized its commitment to preventing future incidents by enhancing its software testing and implementing more rigorous checks. 

Additionally, Delta Air Lines is reportedly preparing its own legal action against CrowdStrike to seek compensation for the substantial losses it incurred. 

This potential lawsuit could further impact CrowdStrike’s reputation and financial stability.

Examples of shareholder activism

CrowdStrike’s legal troubles are part of a broader trend of shareholder activism following corporate mishaps. 

Boeing faced a shareholder lawsuit after the door-plug blowout incident in January, with allegations that the company prioritized profit over safety. 

Similarly, Tesla was sued by institutional investors for allegedly diverting its AI talent to Elon Musk’s new AI-focused company, xAI.

These examples underscore the growing accountability pressures on corporations from their investors, especially when financial losses and safety issues are at stake.

As CrowdStrike navigates this challenging period, the lawsuit and its implications could have far-reaching effects on the company’s operations and market standing. 

With the stakes high, both for the company and its shareholders, the outcome of this legal battle will be closely watched by industry analysts and investors alike.

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Meta Platforms Inc. (NASDAQ: META) has once again captured investor attention, surging over 8% in pre-market trading following its impressive Q2 FY 2024 earnings report. 

The tech giant reported earnings per share (EPS) of $5.16, beating analysts’ expectations by $0.40, and revenue of $39.07 billion, surpassing projections by $760 million. 

This 22.1% year-over-year revenue growth showcases Meta’s continued dominance in the digital space.

Analysts raise price target

Investors and analysts are buzzing with excitement as Meta’s stock continues to rise. Following the earnings release, Rosenblatt analyst Barton Crockett reiterated his Overweight rating on the stock, raising his price target from $545 to $575.

Similarly, Piper Sandler analyst Thomas Champion increased his price target from $572 to $643 while maintaining a Buy rating. This optimistic outlook from analysts reflects confidence in Meta’s strategic direction and growth prospects.

Q2 earnings details & growth drivers

Meta’s robust earnings performance is underpinned by several key factors.

The company’s Family of Apps, including Facebook, Instagram, and WhatsApp, saw daily active users reach 3.27 billion in June 2024, marking a 7% increase from the previous year.

Ad impressions delivered across these platforms rose by 10%, and the average price per ad also increased by 10%.

The advertising segment remains the cornerstone of Meta’s revenue, accounting for 98% of its total income in Q2 FY 2024.

The company reported $38.3 billion in advertising revenue, up 22% year-over-year.

Despite these successes, Meta’s commitment to innovation, particularly in artificial intelligence (AI), remains a focal point. CEO Mark Zuckerberg emphasized the company’s investment in AI, with Meta AI poised to become the most used AI assistant globally by the end of the year.

Meta has also released the first frontier-level open-source AI model and is advancing with its AI-powered Ray-Ban Meta glasses.

Financially, Meta reported operating income of $14.85 billion, a 58% increase, and a net income of $13.5 billion, up 73% from the previous year.

The company’s operating margin improved to 38%, indicating efficient management and cost control.

However, Meta’s capital expenditures are projected to rise, with a forecasted $37 billion to $40 billion by year-end and significant growth anticipated in 2025.

This increase is driven by the need to build infrastructure capacity to support advanced AI models, such as the upcoming Llama 4.

The Reality Labs division, while still incurring losses, represents Meta’s long-term vision in augmented reality and AI. Reality Labs reported a $4.49 billion loss on $353 million in revenue for the quarter.

Challenges and future outlook for Meta

Meta’s growth is not without challenges, particularly regarding its heavy reliance on advertising revenue. While the company is exploring new avenues like AI and AR, the current dependence on ads poses a risk if market dynamics shift.

However, Meta’s strategic diversification efforts, including the expansion of Threads and business messaging, offer potential revenue streams to mitigate this risk over time.

In terms of future outlook, Meta expects third-quarter 2024 revenue to be between $38.5 billion and $41 billion, slightly above analyst expectations. While foreign currency fluctuations pose a headwind to revenue growth, Meta’s strategic investments and focus on AI position it well for sustained growth.

The company’s balance sheet remains strong, with approximately $40 billion in net cash, providing ample resources for continued innovation and shareholder returns.

Valuation & shareholder return

Meta’s valuation remains attractive despite its recent stock surge. The company’s price-to-earnings ratio stands at 23x, which is reasonable for a tech giant with double-digit growth prospects.

Meta’s disciplined approach to capital allocation, including a $50 billion stock buyback program, underscores its commitment to returning value to shareholders. The company repurchased $6.32 billion worth of shares in Q2, reinforcing investor confidence in its future growth.

With its strong fundamentals and strategic focus on innovation, Meta Platforms continues to be a compelling investment opportunity.

As we transition to technical analysis, the company’s robust financial performance and promising growth prospects provide a solid backdrop for examining its stock price trajectory. Now, let’s see what the charts have to say about the stock’s future direction.

Medium-term resistance at $532 must be crossed

Meta’s stock had a phenomenal run between the start of 2023 until Q1 2024, when it appreciated close to 500%. However, since April this year, the stock has been finding it tough to trade above $532, which is acting as a medium-term resistance.

META chart by TradingView

Today’s surge will definitely give hope to the bulls, but investors who haven’t bought the stock yet must not jump in immediately as the stock is displaying range-bound movement in the medium term.

They can initiate a small position today near $510 but should add more to it only if the stock closes above $532 on the daily charts.

Traders who have a bearish bearish outlook on the stock must avoid it shorting it currently. They must initiate a short position only near $532 with a strict stop loss at $546 or they can wait for the stock to show weakness and drop below $500 again to take fresh positions.

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Wayfair Inc. is experiencing a slowdown in the home goods category reminiscent of the global financial crisis of 2008, according to CEO Niraj Shah. 

This cautious consumer spending is significantly impacting the company’s financial performance.

In the earnings release on Thursday, Shah noted, “Customers remain cautious in their spending on the home.”

Wayfair reported earnings of 47 cents per share on $3.12 billion in revenue for its second financial quarter, falling short of the expected 49 cents per share and $3.18 billion in revenue.

As a result, Wayfair’s shares dropped more than 4.0% in premarket trading on Thursday.

CFO Kate Gulliver echoed Shah’s concerns, comparing the current decline in the home goods category to the downturn the company experienced during a GDP recession. 

She highlighted the uniqueness of the current slowdown, noting, “We’re not technically in a GDP recession right now.”

Gulliver warned of continued weakness in home goods sales until the US Federal Reserve begins to cut interest rates and the housing market picks up again. 

Despite these headwinds, the second quarter marked Wayfair’s best performance in terms of adjusted EBITDA and free cash flow generation in three years, likely due to the layoffs announced in January to optimize its cost structure.

Wayfair shares had traded as high as $340 during the COVID-19 pandemic in 2021, underscoring the significant decline since then.

Impact of high interest rates on Wayfair

Wayfair has struggled with sluggish demand for more than a year as elevated interest rates have stalled the housing market. The decline in home sales has directly impacted the demand for new furniture. 

Additionally, persistent inflation has kept consumers wary of discretionary spending, including home goods.

However, there may be hope on the horizon. Federal Reserve Chair Jerome Powell recently suggested that the first interest rate cut could be “on the table” for September, provided that inflation and other economic data remain on their current path. 

This potential easing of interest rates could provide the necessary boost to revive the housing market and, consequently, home goods sales.

Should you buy Wayfair stock on post-earnings weakness?

Given the challenging economic environment, investors might question whether to buy Wayfair stock following its recent earnings report. 

Despite the company’s struggles, there is potential for growth. Heading into the quarterly earnings report, Wall Street analysts had a consensus “overweight” rating on Wayfair shares, with an average price target of $71. 

This target suggests a potential upside of more than 30% from current levels.

The anticipated interest rate cuts and the company’s efforts to optimize costs could lead to improved performance in the near future. 

While the current slowdown in home goods sales is concerning, Wayfair’s strategic moves and the broader economic outlook could position the company for a rebound.

Wayfair’s recent earnings report highlights the challenges faced by the home goods sector in the current economic climate. 

With cautious consumer spending, high interest rates, and persistent inflation, the company has faced significant headwinds. However, the potential for interest rate cuts and the company’s cost optimization strategies offer hope for a recovery. Investors should weigh these factors carefully when considering whether to buy Wayfair stock on post-earnings weakness.

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Former speaker of the US House of Representatives Nancy Pelosi has made headlines once again with her latest trade, purchasing $1.13 million worth of Nvidia stock on July 26. 

Known for her successful investment track record, Pelosi’s continued accumulation of Nvidia shares is sparking speculation about the chip giant’s future prospects.

Just a month prior, Pelosi bought 10,000 Nvidia shares at $126.40 each. 

Her consistent investment in Nvidia suggests she anticipates significant developments from the company. 

Here are three compelling reasons why investors should consider following Pelosi’s lead.

Nvidia’s Blackwell GPUs

Nvidia’s upcoming Blackwell GPUs, based on the Blackwell architecture, promise up to 18 times the performance of the current A100 series and are expected to hit the market by the end of 2024.

As these GPUs become available, companies will be compelled to adopt them to stay competitive in the AI race.

Additionally, with power consumption in data centers becoming a critical issue, the efficiency of Blackwell GPUs will drive demand. Nvidia’s growth trajectory appears strong, with these advancements positioning the company for continued success well into the next year.

Pelosi’s proven investment track record

Nancy Pelosi has a proven track record of outperforming the market. Her trades heavily influence the Unusual Whales Subversive Democratic Trading ETF (NANC), which tracks trades carried out by members of the Democrat party.

The ETF has returned 50% in less than a year and a half. While its true that ETFs like these have only been here for a short time, their performance does show that following the politicians selectively can have value.

Nvidia’s strong fundamentals and market position

Beyond Pelosi’s track record and the promise of Blackwell GPUs, Nvidia’s robust fundamentals make it an attractive investment.

The company’s revenue and profits have surged in recent quarters, driven primarily by advancements in AI. Nvidia’s focus on gaming, AI, and data centers positions it at the forefront of technological development.

For instance, companies have invested heavily in AI infrastructure, and Wall Street is beginning to scrutinize the return on investment (ROI) of these expenditures.

While the ability of generative AI to generate revenue proportional to spending is still debated, the demand for Nvidia’s hardware remains unquestioned.

Regardless of ROI, hardware companies like Nvidia are poised to benefit from ongoing AI investments.

Following Nancy Pelosi’s investment journey with Nvidia appears to be a prudent choice. 

Nvidia’s strategic position in key technological segments and its strong financial performance make it a solid investment. 

As of today, Nvidia shares were last trading at $118.55, and Pelosi has already realized a $50,000 gain on her investment in just a few days.

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UK stocks are poised for potential gains following the Bank of England’s (BOE) decision to cut the key interest rate by 25 basis points to 5.0%. 

This move, aimed at stimulating economic growth, aligns with historical trends that suggest a positive outlook for benchmark UK indices in the months ahead.

Historical performance of FTSE 100 and FTSE 250

Historically, the FTSE 100 and FTSE 250 indices have responded favorably to BOE rate cuts. 

In three out of the last four instances when the Bank of England reduced rates—specifically in 1986, 1990, and 1998—the FTSE 100 saw an average increase of over 20% within the subsequent 12 months. 

Similarly, the FTSE 250 experienced even more significant gains, rallying by 25% or more in these periods.

However, it’s worth noting that the only exception to this trend occurred in 2007, when both indices experienced declines. 

The FTSE 100 dropped by 38%, and the FTSE 250 fell by 46% over the year following a rate cut. 

This downturn was largely attributed to the global financial crisis, making it an outlier in the historical data.

Impact of lower rates on GBP and housing market

The BOE’s decision to lower rates was endorsed by a narrow margin of five to four votes within the Monetary Policy Committee (MPC). 

This decision reflects the central bank’s focus on fostering economic stability without triggering new inflationary pressures. 

Consumer price inflation in the UK has moderated significantly, standing at 2.0% annually in May and June, down from a peak of 11.1% in October 2022.

The current rate cut comes amidst market expectations for additional reductions. 

Money markets are signaling that the BOE might implement two more rate cuts over the next five months. In response to the rate cut, the British pound (GBP) initially weakened against the US dollar but later began to recover. This volatility underscores the market’s sensitivity to future monetary policy signals.

The BOE’s rate cut is also anticipated to provide a much-needed boost to the housing market. 

Stephanie Daley of Alexander Hall commented on the potential positive effects, stating, “The BOE’s decision offers a significant opportunity for homeowners and homebuyers. While mortgage rates may not drop immediately, this change should help release pent-up demand and restore confidence in the housing sector.”

Overall, the BOE’s recent move could set the stage for a favorable period for UK stocks, particularly if historical patterns hold true. 

Investors and market analysts will be closely watching how these developments unfold and what impact they will have on the broader economic landscape.

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Eli Lilly and Company (NYSE: LLY) recently announced promising results from its SUMMIT phase 3 trials, focusing on the efficacy of the tirzepatide injection.

The positive findings have sparked investor interest, driving the stock up by 3% today.

These results are not only significant for Eli Lilly but also hold potential for millions of patients suffering from heart failure with preserved ejection fraction (HFpEF) and obesity.

Promising trial results

The SUMMIT phase 3 trial results revealed that tirzepatide reduced the risk of heart failure outcomes by 38% compared to a placebo. Additionally, all key secondary endpoints were successfully met, including:

It reduced the risk of heart failure outcomes by 38% compared to placebo.

All l key secondary endpoints were met successfully. These included exercise capacity, mean body weight reduction from baseline at 52 weeks, and reduction in the inflammation marker high-sensitivity C-reactive protein.

For the efficacy estimand, it led to a 15.7% weight reduction compared to 2.2% for placebo.

For the treatment regimen estimand, it led to a 13.9% reduction in body weight compared to 2.2% for placebo.

Why is this result significant?

The result carries weight because HFpEF (heart failure with preserved ejection fraction) accounts for 50% of all heart failure cases. In the US, 60% of those also suffer from obesity.

It is a condition where the left pumping chamber of the heart becomes stiff and is unable to fill normally. Thanks to tirzepatide, this problem can finally be addressed.

The company will now submit the SUMMIT study findings to the FDA and hope for a positive response from them. If the drug is approved, tirzepatide could become the cornerstone of Eli Lilly’s portfolio and substantially boost revenue.

CEO says shortage of tirzepatide should end soon

CEO David Ricks had more good news for the investors today as he claimed the shortage of tirzepatide should end soon. He made this revelation during an interview with Bloomberg.

Some doses of LLY’s weight loss drugs Zepbound and Mounjaro have been on FDA’s shortage list for some time now. In fact, Mounjaro is on that list since since 2022.

The company had initially stated in April that it expects the supply to remain tight. However, the CEO’s comments have increased investor confidence and hopes.

What does the chart say?

LLY stock has been on a downslide recently as the US market corrects across the board. The announcement of the drug trial comes at a time when the stock was about to test a key support level as shown in the chart below.

The trendline that started over a year ago was about to be approached but the stock price never reached there. Traders will probably still wait for a retesting of that line but investors, on the back of above positive developments will hope that the retesting isn’t needed and the stock can continue its upward journey.

As the market tumbles today, investors will find comfort in the fact that LLY stock is still up 3%. Only time will tell if that’s temporary though.

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Lockheed Martin (NYSE: LMT), a titan in the defense and aerospace sector, is back in the spotlight after experiencing seven consecutive days of gains.

This surge follows the company’s recent Q2 earnings report, but the reasons behind this rally go beyond a single quarterly update.

As geopolitical tensions simmer globally, Lockheed Martin’s stock is reflecting a renewed investor interest.

Strong Q2 earnings boost investor confidence

Last week, Lockheed Martin reported robust Q2 earnings, showcasing a significant increase in financial performance. 

The company generated $18.1 billion in sales, marking a 9% year-over-year growth. Notably, Lockheed Martin’s cash flow doubled to $1.5 billion, a clear indicator of its efficient contract execution and financial health. 

This surge in cash flow not only strengthens the company’s ability to invest in research and development but also positions it favorably for future customer acquisitions and shareholder returns through dividends and stock buybacks.

Geopolitical tensions and market impact

Lockheed Martin’s recent financial success is coinciding with a turbulent geopolitical landscape, which historically benefits defense stocks. 

Despite a period of stagnant performance, the company’s stock is now capitalizing on escalating global conflicts. 

Notably, the company increased its guidance for the rest of the year before the recent intensification of Middle Eastern tensions, including Iran’s threats of war following the assassination of Hamas leader Ismail Haniyeh.

The ongoing conflicts in Ukraine and Palestine, coupled with potential regional spillovers, suggest sustained demand for defense solutions. 

As Lockheed Martin navigates these challenges, its stock appears to be catching up for earlier periods of lackluster performance, reflecting a broader investor optimism about the company’s prospects amid global instability.

Analyst ratings

The positive earnings report and the current geopolitical climate have bolstered Lockheed Martin’s stock performance, with its share price currently trading around $544, above the average analyst target of $535.84. The highest analyst price target is set at $635, suggesting potential further upside.

In recent months, the number of buy ratings on Lockheed Martin has increased from 5 to 8, while hold ratings have decreased from 19 to 13.

This shift indicates growing confidence among analysts and suggests that the stock may experience further upward momentum in the near future.

The recent surge in Lockheed Martin’s stock price could be just the beginning, with expectations for additional gains as geopolitical uncertainties continue to drive defense spending.

Lockheed Martin’s impressive Q2 earnings, coupled with the ongoing global geopolitical crises, have fueled a significant rise in its stock price over the past week.

With strong financials and an advantageous position amid global tensions, the company is poised to benefit further. Investors and analysts alike are closely watching the stock, which appears set for continued gains based on current trends and market conditions.

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Riot Platforms (RIOT) stock price has broken a bad record for the year. It has retreated in the past nine straight days and reached a low of $10, its lowest swing since July 12. It was its longest losing streak since January when it tumbled for six days straight. 

Bitcoin price retreat continues

Riot Platforms, formerly known as Riot Blockchain, is one of the biggest players in the Bitcoin mining industry. It is the third-biggest mining company in the world in terms of market cap after Marathon Digital and CleanSpark. 

Riot is also the fifth-biggest corporate Bitcoin holder in the industry after MicroStrategy, Marathon Digital, Tesla, and Coinbase. It holds 9,333 coins valued at over $605 million.

Therefore, the company does well when Bitcoin is thriving and vice versa. A higher BTC price means that the company will publish strong results. It also means that its balance sheet will do better. 

Riot Platform’s sell-off continued this week after Bitcoin lost momentum. After soaring to a weekly high of $70,000 on Monday, the coin dropped below $64,000 on Monday. 

Riot Platform’s recent updates

Riot, like other Bitcoin mining companies, has been under pressure in the past few months. The main catalyst for this weakness is April’s halving event that reduced the block rewards offered to miners.

Since then, Riot and other miners have produced fewer coins and this trend will continue until they boost their output. Riot Platforms produced 844 coins in the second quarter, a 52% decline from the 1,772 coins it mined in the second quarter of last year. 

These companies will need to spend money to acquire more mining machines to deal with the halving event. Another approach will be to spend money on acquisitions. Riot Platforms has been working to acquire Bitfarms, a company known for its low mining costs. 

Bitfarms has rejected the offer and executed a posion pill to prevent Riot from increasing its stake and forcing a sale. Still, Riot has continued accumulating the shares, including this week. 

Riot has also continued with its acquisitions. Earlier this week, it acquired Block Mining in a $92 million deal. Block will add 1 EH/s to Riot’s with a capacity for up to 16 EH/s by the end of next year.

Cipher Mining, another Bitcoin mining company, is exploring a sale while Core Scientific rejected a bid from Coreweave. This consolidation will likely continue.

The other approach is where the companies expand their businesses into other cryptocurrencies and services. Marathon Digital has started mining Kaspa while others have moved to artificial intelligence (AI).

Riot Platforms earnings

One of the biggest RIOT news this week was its financial results, which came out on Wednesday. The company said that its revenue came in at $70 million, down from $76.7 million in the same period in 2023. 

This performance happened because of a deep dive in its engineering revenue and offset by its Bitcoin mining numbers. 

Riot’s cost of mining Bitcoin jumped exponentially from $5,734 in Q2’23 to over $25,327 because of the halving event. Halving has led to a big increase in Bitcoin mining difficulty. 

Riot expects to continue growing its hashrate in the coming years. It ended the quarter with a rate of 22 EH/s, a figure it expects will rise to 100 EH’s by 2027.

H.C Wainwrite is bullish on Riot

In a note after its earnings, analysts at H.C Wainwrite noted that they were extremely bullish on the Riot Platforms stock despite the recent sell-off. Their estimate is that the stock will rise to $17, implying a 70% increase from the current level. They wrote:

“​​Riot now has a pipeline in place to achieve over 2 GW of total power capacity over the near term and good line of sight to achieve its 2024 and 2025 growth objectives, which are fully funded, as Riot has over $1B of liquidity on the balance sheet vs. $694M of total estimated capex requirements through 2025.”

 Still, the risk to this thesis is that Bitcoin may have peaked now that it has failed to move above the key resistance point at $70,000. Another crypto winter will lead to more Riot Platforms stock retreat.

Riot Platforms stock price analysis

Turning to the daily chart, we see that the RIOT share price has been in a strong downtrend in the past few days. This sell-off started when it rose to a high of $13, the upper side of the ascending channel in July. 

The stock remains below the 50-day and 100-day moving averages, which is a bearish sign. Most importantly, it has formed a bearish flag chart pattern shown in black. In most cases, this pattern results into a strong bearish breakout. 

Therefore, the stock could continue falling, especially if it drops below the lower side of the flag pattern.

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