We recently compiled a list of 10 Worst Falling Stocks to Buy Now. In this article, we will see where Riot Blockchain, Inc. (NASDAQ:RIOT) ranks among the top 10 bearish stocks to buy right now.
To the new investor, the stock market can appear like an unpredictable graph with no inherent logic to its ups and downs. However, this is far from reality as any stock market performance is primarily determined by fundamentals, market sentiment, news, large purchases or sales, and other factors.
As a result, the savvy investor can make money on stocks by trying to predict whether a company has important catalysts that are not factored into the stock price. Of course, this is a risky approach, and one not recommended by Warren Buffett, as we covered in the 10 Best Stocks for Beginners with Little Money. However, since hindsight is 6/6, looking back explains a lot about how companies see their stock prices fall.
Digging deeper, you don’t have to look far to find stocks that have struggled following shocking and disappointing fundamental performance. One of the best examples of 2024 is the 12th Best Data Center Stock to Buy According to Analysts at Jefferies, Citi and Wall Street. Founded in 1968, the company defined the era of personal computing with its processors. Yet in a chip-hungry world of 2024, its shares have fallen a painful 52% since the start of the year and an astonishing 69% since their August 2000 peak.
So why is this stock falling when it has total assets of $191 billion, $25 billion in cash and equivalents and generated $55 billion in revenue over the last twelve months? Well, the answer is simple. During its second quarter of 2024, the company’s profit fell 85% annually while posting a net loss of $1.6 billion. Its size and scale allowed the company to pay dividends, which helped it retain some stock value even as problems began to become evident last year. The current dividend yield is 2.29%, but dividends will be suspended starting in the fourth quarter as part of the company’s $10 billion cost-cutting plan.
Its shares fell 30% after reporting second-quarter results, and investor pessimism is exacerbated by the competitive nature of the semiconductor industry. The chipmaker has lost its lead in developing cutting-edge semiconductor manufacturing technologies to a Taiwanese rival, and investors are on the sidelines as its own 18A chip process is only expected to generate revenue. ‘to the end of 2025 and beyond.
Still, while a 52% year-to-date decline is bad, it doesn’t make the company one of the worst falling stocks right now. Looking at declining stocks with a market cap above $300 million, a notable example in 2024 is a self-driving stock that was owned by a billionaire hedge fund boss. 4th best long-term stock pick in Q3 2023. The fund first bought the stock in Q2 2021 and its shares are down 73% year to date.
This company makes light detection and radar (LiDAR) sensors that are primarily used by autonomous vehicle manufacturers to sense their surroundings. As with the chipmaker, the company’s difficulties are also linked to its business. However, even though the semiconductor industry is robust, the automotive industry and particularly the electric vehicle sector have struggled due to high rates which have driven down prices. For this particular stock, difficulties were evident in February when shares fell 10% following news that its largest customer Volvo was experiencing production delays.
The woes deepened further in April after a BofA rating downgraded the shares from neutral to underperform and reduced the stock’s price target from $3.50 to $1.20 . Its stock fell 16%, with analysts noting that “model launch delays and reduced volume expectations for vehicles expected to adopt LIDAR technology are leading to a significant decline in our volume forecasts.” The final nail in the proverbial coffin came in August after $16.5 million in revenue and $0.18 loss per share missed FactSet analyst estimates of $20.4 million and $0.17 million. of dollars. The stock plunged another 37% and has been in the trash ever since.
Speaking of the auto industry, another inventory drop in 2024 was ironically the 11th best performing stock on the NASDAQ stock exchange in 2023 in October 2023. The stock had then seen a gain of 288% and in 2024, shares are down 78.8% year to date. This company is a lithium mining company, but it has yet to turn a profit and operating expenses have increased even as lithium prices are at historic lows. The slowdown in the lithium industry has pushed back its earnings estimates for the future and, as a result, stocks have suffered.
Our methodology
To compile our list of the hottest bear stocks to buy, we ranked the 50 worst-performing stocks of 2024 with a market cap over $300 million based on their short interest as a percentage of shares outstanding. Of these, stocks with the highest short interest percentage were selected.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in stocks that hedge funds are piling into? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of a laptop screen with stock prices scrolling up and down.
Riot Blockchain, Inc. (NASDAQ: RIOT)
Number of hedge fund holders in the second quarter of 2024: 12
Short interest % of shares outstanding: 16.52
Share price loss since the beginning of the year: 51.14%
Riot Blockchain, Inc. (NASDAQ: RIOT) is a Bitcoin mining company based in Castle Rock, Colorado. The company has been the center of media coverage in one form or another in 2024. Riot Blockchain, Inc. (NASDAQ:RIOT) made a major announcement in May when it announced an acquisition offer for Bitfarm. The team aimed to make the company the largest Bitcoin miner in the world with a power capacity of 1.5 GW and a hash rate of 52 EH/s. However, Bitfarm rejected the offer, but ongoing negotiations led the two sides to announce a deal in September that saw a Bitfarm founder resign and Riot Blockchain, Inc. (NASDAQ: RIOT) agree to withdraw its request . The stock has also suffered this year due to the impact of a short-seller report released in June, accusing the company of burning through cash. Cash flow is important for the company as it aims for aggressive expansion by ordering more than 60,000 miners and installing substations with a capacity of more than 100 MW. Riot Blockchain, Inc.’s (NASDAQ: RIOT) 400 MW substation also suffered from a delay earlier this year, and these decisions are due to its revenue decline due to the Bitcoin halving in 2024.
During the second quarter 2024 earnings conference call, Riot Blockchain, Inc. (NASDAQ:RIOT) management explained how it is navigating a challenging environment:
“However, with significant growth in our hash rate capacity expected for the remainder of the year, we expect to produce more Bitcoin per day by the end of 2024 than in the first quarter of 2024, reducing notwithstanding. Quarter During the second quarter of 2024, Riot reported total revenue of $70 million, compared to $76.7 million for the second quarter of 2023, a decrease of 9% year-on-year. Other This decline was mainly due to lower revenues from the company’s engineering division during the quarter, as Riot reclassified third-party hosting revenues and costs to other mining-related segments. of Bitcoin, as previously reported in the first quarter of 2024.”
Global RIOT ranks 5th on our list of the hottest stocks to buy now. While we recognize the potential of RIOT as an investment, our conviction lies in the belief that certain AI stocks hold more promise in terms of higher returns and in a shorter time frame. If you’re looking for an AI stock that’s more promising than RIOT but is trading at less than 5x earnings, check out our report on cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
