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3 ‘Picks and Shovels’ Crypto Stocks Poised to Double as the Sector Matures
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The cryptocurrency sector continues to mature, with significant trends emerging in 2024 that highlight the growing importance of infrastructure within the industry. Notable areas of investment include blockchain infrastructure and digital payments solutions. They are crucial and essential to support the wider adoption of cryptocurrencies.
Furthermore, the regulatory environment is evolvingwith many countries developing frameworks to support the growth of the crypto industry. These regulations aim to provide clarity and certainty.
All of these points are bullish tailwinds for crypto infrastructure stocks to be worth much more in the future. The following companies deserve investors’ attention given their growth trajectory and overall potential.
So, let’s take a look at three crypto infrastructure stocks that investors should consider adding to their portfolios this month.
Digital Marathon (MARA)
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Digital Marathon (NASDAQ:MARA) is one of the largest publicly traded companies Bitcoin (BTC-USD) mining companies.
In fact, MARA’s Q1 2024 revenue grew by an impressive 223% year after year (ECA) to $165.2 million. Increased Bitcoin production and higher Bitcoin prices have driven the stock higher. The company’s mining operations are highly profitable, with adjusted EBITDA increasing 266% to $528.8 million.
Looking ahead, Marathon Digital has outlined ambitious growth plans that could drive continued increases in revenue and profits. The company is targeting 50 EH/s of mining capacity by the end of 2024, nearly doubling from the 27.8 EH/s it had at the end of Q1.
From a valuation perspective, MARA’s current forward price/earnings ratio (PHYSICAL EDUCATION) the 6.17x ratio seems quite attractive if the company can execute on its growth initiatives. Analysts are predicting strong revenue growth. And revenue is expected to increase more than 80% to $710 million in 2024. Therefore, MARA’s valuation multiples could quickly expand to levels more in line with the company’s robust growth profile.
CME Group (CME)
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CME Group (NASDAQ:CME) operates derivatives exchanges, including those for cryptocurrencies such as Bitcoin and Ethereum (ETH-USD).
In the first quarter of 2024, CME Group reported record adjusted net income and earnings per share. It was driven by strong trading volumes in key products such as U.S. Treasury futures and options and commodities. The company’s average daily volume reached 26.4 million contracts. Revenues increased a respectable 3.2% YoY to $1.5 billion, while adjusted EPS grew 3.4% to $2.50.
On the other hand, CME shares trade at almost 20 times future earnings estimates. While not overly expensive relative to the broader market, this is not an obviously cheap multiple for a mature, slow-growing financial exchange. The stock’s modest 2.36% dividend yield, while attractive, is also not high enough to generate significant near-term outperformance. Still, CME’s moves are enough to make it one of those crypto infrastructure stocks that could double in the next decade as demand for derivatives grows.
Advanced Micro Devices (AMD)
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Advanced microdevices (NASDAQ:AMD) manufactures GPUs and other computing equipment used in cryptocurrency mining.
Notably, AMD stock could potentially double from current levels. First, AMD delivered impressive financial results in Q1 2024, with revenue growing 2% YoY to $5.5 billion despite a challenging macro environment. The company’s Data Center and Client segments were particularly strong, each growing over 80%.
Looking ahead, AMD is poised to benefit from the explosive growth of artificial intelligence (AI). As Executive Director (CEO) Dr. Lisa Su noted that the widespread deployment of AI is driving demand for significantly more computing power in many markets. AMD is enabling AI capabilities across its product stack, from data center GPUs and CPUs to PC processors. The company’s MI300 accelerators are showing strong early traction.
Furthermore, the main risk to the bullish thesis is AMD’s wealth assessment. With a forward P/E of 44x, the stock is already pricing in a lot of growth. AMD will need to maintain its strong execution and market share gains to justify its premium multiple. However, it is one of those crypto infrastructure stocks that has a solid chance of doubling in value.
On the date of publication, Matthew Farley had no (directly or indirectly) positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to InvestorPlace.com Publishing Guidelines.
On the date of publication, the editor in charge did not have (directly or indirectly) any positions in the securities mentioned in this article.
Matthew began writing coverage of financial markets during the 2017 cryptocurrency boom and has also been a team member at several fintech startups. He then began writing about Australian and US stocks for a number of publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and New Scientist magazine, among others.
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