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Marathon Digital (MARA) Up 43% in 6 Months: Is it Worth Buying?
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Marathon Digital Holdings, Inc. (MARA - Free Report) has had an impressive run in the past six months, with the stock surging 42.6%.
This impressive rise has significantly outpaced the 24.5% rally seen in the industry it belongs to and the 14.6% growth of the Zacks S&P 500 composite.
6 Months Price Performance
Image Source: Zacks Investment Research
In its last trading session, the stock closed at $23.95, trading above its 50-day moving average. This positive trend in MARA’s stock can be attributed to its mining efficiency and the company’s strategic expansion into mining Kaspa.
MARA Stock Trades Below 50-Day Average
Image Source: Zacks Investment Research
Given the continuous strength of MARA shares, many investors might be tempted to buy the stock. However, the pertinent question remains: Is now the right time to invest in MARA? To answer this, it’s important to delve into the details and analyze the various factors at play.
Mining Efficiency Strong Amid Production Decline
Marathon, along with its competitors Riot (RIOT - Free Report) and CleanSpark (CLSK - Free Report) , has experienced a significant year-over-year decline in production as of June 2024. This reduction is primarily due to the Bitcoin halving event that took place in April. The halving event has led to a situation where each ASIC miner now needs to exert twice the effort to mine the same amount of Bitcoin as before.
However, Marathon’s recent updates provided some encouraging news. Despite the production challenges, Marathon managed to mine the most Bitcoin among its peers, boosted its industry-leading HODL stash, and achieved the highest mining efficiency in terms of revenues per exahash.
In June alone, Marathon mined 590 Bitcoin at a production rate of 19.7 BTC/day, compared with Riot’s 255 Bitcoin at a rate of 8.5 BTC/day and CleanSpark’s 445 Bitcoin at a rate of 14.8 BTC/day.
Diversification Initiatives Enhancing Prospects
In June, Marathon announced a new initiative aimed at further diversifying its business model. This announcement followed its strategy of making its technology available to other Bitcoin miners. The company revealed that it is venturing into mining Kaspa, the fifth-largest proof-of-work digital asset. Marathon has already acquired 60 petahashes of miners to mine Kaspa and expects full deployment by the third quarter.
This diversification into Kaspa mining is expected to positively impact Marathon’s revenue and profitability due to the high margins associated with mining Kaspa. By broadening its mining portfolio, it aims to strengthen its market position and mitigate risks associated with relying solely on Bitcoin mining.
Robust Liquidity Position
Marathon’s liquidity remains strong, with a current ratio of 23.07 at the end of the second quarter of 2024. This is in contrast to the industry average of 0.95. A current ratio above 1 indicates that the company is well-positioned to meet its obligations. Marathon’s strong liquidity position provides it with the financial flexibility to pursue growth opportunities and weather potential market fluctuations.
Image Source: Zacks Investment Research
Top-Line Growth Prospects and Bottom-Line Challenges
The Zacks Consensus Estimate for Marathon’s 2024 revenues is pegged at $687.2 million, indicating significant 77.3% growth from the year-ago quarter. Sales are expected to continue their upward trajectory, with a projected year-over-year increase of 43% in 2025.
However, despite the strong revenue growth prospects, the company’s bottom line appears less optimistic. The consensus estimate for Marathon’s 2024 earnings stands at 12 cents per share, which represents a 29.4% decline year over year. Earnings in 2025 are expected to decline more than 100% year over year. This indicates that while Marathon’s top line is growing robustly, its profitability is under pressure, which could be a cause for concern for investors.
Evaluating the Right Entry Point
Considering the substantial increase in MARA’s stock price over the past six months, there is a possibility that the stock may experience a correction soon. Currently, MARA is trading above its 50-day moving average. Although the company’s revenue prospects are strong, the weak outlook for its bottom line suggests that investors should exercise caution.
Timing the market is crucial, and potential investors might benefit from adopting a wait-and-see approach, observing how Marathon’s financial performance evolves in the upcoming earnings report. Investors should closely monitor both the top and bottom-line performance to make informed decisions about the right entry point for investing in MARA.
Image: Bigstock
Marathon Digital (MARA) Up 43% in 6 Months: Is it Worth Buying?
Marathon Digital Holdings, Inc. (MARA - Free Report) has had an impressive run in the past six months, with the stock surging 42.6%.
This impressive rise has significantly outpaced the 24.5% rally seen in the industry it belongs to and the 14.6% growth of the Zacks S&P 500 composite.
6 Months Price Performance
In its last trading session, the stock closed at $23.95, trading above its 50-day moving average. This positive trend in MARA’s stock can be attributed to its mining efficiency and the company’s strategic expansion into mining Kaspa.
MARA Stock Trades Below 50-Day Average
Given the continuous strength of MARA shares, many investors might be tempted to buy the stock. However, the pertinent question remains: Is now the right time to invest in MARA? To answer this, it’s important to delve into the details and analyze the various factors at play.
Mining Efficiency Strong Amid Production Decline
Marathon, along with its competitors Riot (RIOT - Free Report) and CleanSpark (CLSK - Free Report) , has experienced a significant year-over-year decline in production as of June 2024. This reduction is primarily due to the Bitcoin halving event that took place in April. The halving event has led to a situation where each ASIC miner now needs to exert twice the effort to mine the same amount of Bitcoin as before.
However, Marathon’s recent updates provided some encouraging news. Despite the production challenges, Marathon managed to mine the most Bitcoin among its peers, boosted its industry-leading HODL stash, and achieved the highest mining efficiency in terms of revenues per exahash.
In June alone, Marathon mined 590 Bitcoin at a production rate of 19.7 BTC/day, compared with Riot’s 255 Bitcoin at a rate of 8.5 BTC/day and CleanSpark’s 445 Bitcoin at a rate of 14.8 BTC/day.
Diversification Initiatives Enhancing Prospects
In June, Marathon announced a new initiative aimed at further diversifying its business model. This announcement followed its strategy of making its technology available to other Bitcoin miners. The company revealed that it is venturing into mining Kaspa, the fifth-largest proof-of-work digital asset. Marathon has already acquired 60 petahashes of miners to mine Kaspa and expects full deployment by the third quarter.
This diversification into Kaspa mining is expected to positively impact Marathon’s revenue and profitability due to the high margins associated with mining Kaspa. By broadening its mining portfolio, it aims to strengthen its market position and mitigate risks associated with relying solely on Bitcoin mining.
Robust Liquidity Position
Marathon’s liquidity remains strong, with a current ratio of 23.07 at the end of the second quarter of 2024. This is in contrast to the industry average of 0.95. A current ratio above 1 indicates that the company is well-positioned to meet its obligations. Marathon’s strong liquidity position provides it with the financial flexibility to pursue growth opportunities and weather potential market fluctuations.
Top-Line Growth Prospects and Bottom-Line Challenges
The Zacks Consensus Estimate for Marathon’s 2024 revenues is pegged at $687.2 million, indicating significant 77.3% growth from the year-ago quarter. Sales are expected to continue their upward trajectory, with a projected year-over-year increase of 43% in 2025.
However, despite the strong revenue growth prospects, the company’s bottom line appears less optimistic. The consensus estimate for Marathon’s 2024 earnings stands at 12 cents per share, which represents a 29.4% decline year over year. Earnings in 2025 are expected to decline more than 100% year over year. This indicates that while Marathon’s top line is growing robustly, its profitability is under pressure, which could be a cause for concern for investors.
Evaluating the Right Entry Point
Considering the substantial increase in MARA’s stock price over the past six months, there is a possibility that the stock may experience a correction soon. Currently, MARA is trading above its 50-day moving average. Although the company’s revenue prospects are strong, the weak outlook for its bottom line suggests that investors should exercise caution.
Timing the market is crucial, and potential investors might benefit from adopting a wait-and-see approach, observing how Marathon’s financial performance evolves in the upcoming earnings report. Investors should closely monitor both the top and bottom-line performance to make informed decisions about the right entry point for investing in MARA.
MARA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.