Investing in blockchain stocks over cryptocurrencies like Bitcoin (BTC-USD) can be more of a speculative option. It can lead to higher overall returns. I see investing in blockchain stocks as a kind of synthetic leverage. It offers the potential to amplify both gains and losses for investors.
While investing in cryptocurrencies exposes investors to certain risks, the risks of investing in blockchain stocks are wider. Investors need to worry about company-specific, market, and idiosyncratic risks that aren’t present in the broader crypto markets. However, those same risks are also balanced by a proportionate upside. Most blockchain stocks carry a large amount of crypto on their balance sheets. They also have operating segments that totally depend on the health and performance of the industry. So when Bitcoin rises, too does the valuation of these companies, all else being equal.
However, blockchain stocks may get earnings from other operating segments as well. This can improve their intrinsic value and thus be worth more in the long-run. Additionally, it’s very possible these companies may pay dividends in the future. Thus, buying these companies now while they’re still relatively inexpensive could lead to a much lower cost basis in the future.
I think that investing in blockchain stocks could be a good move as we gear up for the climax of this year’s crypto rally. Here are three companies to consider.
Riot Blockchain (RIOT)
Riot Blockchain (NASDAQ:RIOT) focuses on Bitcoin mining. It aims to be a leading Bitcoin producer in the U.S. with plans for technological upgrades and expansion.
For this year, the company has ambitious expansion plans despite expectations of a challenging environment. This is due to the 2024 Bitcoin halving event, which is anticipated to halve Bitcoin production. Nonetheless, the company is expected to triple its mining capacity in 2024. Thus, it still believes the price of the asset will be accretive for investors.
Framing this effort is that in June 2023, Riot entered into a long-term purchase agreement with MicroBT. Riot ordered 33,280 Bitcoin miners for the Corsicana Facility, with another order of 66,560 Bitcoin miners announced in December 2023. Once all of RIOT’s miners have been deployed, it will have a total hash rate capacity of 38 EH/s. This makes it one of the top cryptocurrency mining stocks in the United States.
The consensus among analysts is to “Moderate Buy” RIOT shares. Price targets suggest an upside potential of 11.6% from the current price. However, I think it’s one of those blockchain stocks to buy. Owning shares of it could be the closest thing equity investors can get to owning actual Bitcoin. Remember, RIOT also profits from Bitcoin mining fees as well, which makes it an attractive option.
Block (SQ)
Block (NYSE:SQ) operates Cash App and payment processing for businesses. The company has also invested significantly in Bitcoin and is developing crypto technology through its team, Spiral.
I think that SQ stock could be a great pick this year, as it recently improved its guidance. The company has raised its full-year profit guidance by more than $200 million, forecasting earnings of at least $2.63 billion, marking a growth of at least 15% from the previous year. For Q1 2024, Block anticipates adjusted core earnings between $570 million and $590 million, surpassing analysts’ expectations of $511.76 million. Despite a net loss of $0.02 per share in the latest quarter, the company’s revenue surged by 24% to $5.77 billion in Q4, with a significant portion excluding Bitcoin revenue.
Wall Street analysts have a “Strong Buy” consensus on Block, with 32 analysts recommending a “Moderate Buy.” The average price target for SQ shares is $82.44, suggesting a potential upside of 5.1% from the current price.
Cash App has 55 million monthly active users, many of whom are experienced and familiar with FinTech by the nature of the app, and more are being exposed to the ecosystem every quarter. Furthermore, on an EPS basis, analysts expect to see an incredible leap from 0.02 in FY2023 to 3.15 in FY2024; that’s a 15,640.67% increase!
Projections like these can’t be ignored, and this is why SQ is one of those blockchain stocks to consider.
Visa (V)
Visa (NYSE:V) has invested in blockchain since 2016, developing technologies like Visa B2B Connect for cross-border payments and Visa Fintech Fast Track for crypto wallets.
The company kicked off its fiscal year 2024 on a strong note with significant financial growth. In the first quarter of 2024, the company reported a 9% increase in net revenues, reaching $8.6 billion. This growth was driven by an 8% rise in payment volumes and a 16% surge in cross-border volume, excluding intra-Europe transactions.
Analysts remain optimistic about Visa’s performance, predicting steady growth. For the fiscal year 2024, earnings per share (EPS) estimates average $9.92, with forecasts for 2025 rising to $11.16. Revenue predictions also reflect positive growth, with an average estimate of $35.86 billion for 2024, escalating to $39.59 billion in 2025.
Visa is simply one of those stocks that offer great value for investors, and its short-term results and outlook make it one of those blockchain stocks investors should pay attention to moving forward.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.