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Marathon Digital (MARA) Falls 28% YTD: Buy, Hold or Sell?
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Marathon Digital Holdings, Inc. (MARA - Free Report) shares have declined 28.2% in the year-to-date period against the 19.1% rally seen in the industry it belongs to and 18% growth of the Zacks S&P 500 composite.
MARA’s performance is in line with the close competitors in the bitcoin-mining space. RiotPlatforms, Inc. (RIOT - Free Report) has plummeted 48% and HuT 8 Corp. (HUT - Free Report) has lost 14.2% over the same period.
While the year-to-date performance of Marathon Digital paints a negative picture, it is crucial to look at the one-year price movement for a fuller understanding. The MARA stock has increased 59.8% in the past year, indicating that the current fall is part of a correction phase.
Given the recent fall in Marathon Digital’s shares, investors may feel inclined to buy the stock. However, the crucial question remains: Is this the right time to invest in MARA? Let us delve into the details.
Efficient Mining Amid Falling Yields
The Bitcoin halving event that took place in April resulted in a significant year-over-year decline in the production capabilities of Marathon Digital, along with its competitors RIOT and HUT, as of July 2024. The halving event led to a situation wherein each Application-Specific Integrated Circuit miner is required to exert twice the effort to mine the same amount of Bitcoin.
However, MARA’s recent updates provided some encouraging news. Despite the production challenges, Marathon Digital managed to beat its competitors in terms of mining Bitcoin. It has mined 692 Bitcoin at a production of 22.3 BTC/day compared with Riot’s 370 Bitcoin at 11.9 BTC/day and Hut 8’s 105 BTC at a rate of 3.9 BTC/day in July. Such a performance boosted MARA’s industry-leading Hold on for Dear Life stash and achieved the highest mining efficiency in terms of revenues per exahash.
Marathon Digital plans to improve its fleet efficiency by deploying S21 Pros and immersion cooling. The company’s newly acquired sites in Texas and Nebraska have improved hash rates by 25% and 15% in second-quarter 2024, respectively. It aims to reach a hash rate of 50 exahash at the end of 2024 from 31.5 exahash in the second quarter of 2024.
Flexible Data Centers Expand Market Reach
Marathon Digital has recently introduced an mining facility that can be specifically used for either Bitcoin mining or AI. As a data center operator, this implies that the company can run Bitcoin mining and will be able to move to High-Performance Computing whenever desired without changing any infrastructure. MARA is optimistic about the conversations with the Original Equipment Manufacturers on the AI side as they are akin to this concept since it allows customers to deploy infrastructure and have it going for AI while utilizing it for Bitcoin mining in the near term.
We anticipate such an innovation to broaden the company’s market reach, thereby leading to increased revenues. Such a customer-orient initiative can be expected to foster loyalty and attract business.
Kaspa Mining Enhances MARA’s Portfolio
Marathon Digital revealed that it is venturing into mining Kaspa, the fifth-largest proof-of-work digital asset. The company has already acquired 60 petahash of miners to mine Kaspa and expects full deployment by the third quarter of 2024.
Venturing into Kaspa mining is expected to positively impact Marathon Digital’s top line and profitability due to the high margins associated with mining Kaspa. By broadening its mining portfolio, MARA aims to strengthen its market position and lower the risks associated with relying solely on Bitcoin mining.
Marathon Digital anticipates Kaspa to consume only 1% of its energy capacity. MARA currently mines Kaspa at 80% plus margins, which is highly accretive as those margin dollars can be used for everything from covering general and administrative expenses to acquiring Bitcoin in the open market.
Marathon Digital’s Liquidity Stronger Than Peers
MARA has a strong liquidity position. It reported a current ratio of 3.75 at the end of the second quarter of 2024. This is compared with the industry average of 0.95. A current ratio above 1 indicates that the company is well-positioned to meet its obligations. A strong liquidity position enables Marathon Digital with the financial flexibility to capitalize on growth opportunities and navigate through looming market fluctuations.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $672.3 million, suggesting a 77.3% surge from the year-ago quarter’s actual. Sales are anticipated to continue ascending, with 43% year-over-year growth in 2025.
However, despite the strong revenue growth prospects, the company’s bottom-line picture appears less optimistic. Marathon Digital is expected to report a loss of 20 cents per share in 2024, which indicates a more than 100% year-over-year decline. Earnings in 2025 are expected to dip more than 100% year over year as well. This suggests that while the company’s top line is thriving, its profitability is under pressure, which could lead investors to take a more cautious approach.
Evaluating the Right Entry Point
Although a substantial increase in MARA’s stock price has been observed over the past year, the recent price declines suggest that it is currently undergoing a correction, indicating that waiting for a more advantageous entry point could yield better returns for investors. The company’s efficient mining capabilities, portfolio diversification initiatives, industry-beating liquidity position and positive top-line expectations highlight its potential for sustained growth, making it an obvious investment in the long term. However, potential investors should remain patient and watch for further adjustments in Marathon Digital’s stock price to find the right entry point.
Image: Bigstock
Marathon Digital (MARA) Falls 28% YTD: Buy, Hold or Sell?
Marathon Digital Holdings, Inc. (MARA - Free Report) shares have declined 28.2% in the year-to-date period against the 19.1% rally seen in the industry it belongs to and 18% growth of the Zacks S&P 500 composite.
MARA’s performance is in line with the close competitors in the bitcoin-mining space. Riot Platforms, Inc. (RIOT - Free Report) has plummeted 48% and HuT 8 Corp. (HUT - Free Report) has lost 14.2% over the same period.
While the year-to-date performance of Marathon Digital paints a negative picture, it is crucial to look at the one-year price movement for a fuller understanding. The MARA stock has increased 59.8% in the past year, indicating that the current fall is part of a correction phase.
Given the recent fall in Marathon Digital’s shares, investors may feel inclined to buy the stock. However, the crucial question remains: Is this the right time to invest in MARA? Let us delve into the details.
Efficient Mining Amid Falling Yields
The Bitcoin halving event that took place in April resulted in a significant year-over-year decline in the production capabilities of Marathon Digital, along with its competitors RIOT and HUT, as of July 2024. The halving event led to a situation wherein each Application-Specific Integrated Circuit miner is required to exert twice the effort to mine the same amount of Bitcoin.
However, MARA’s recent updates provided some encouraging news. Despite the production challenges, Marathon Digital managed to beat its competitors in terms of mining Bitcoin. It has mined 692 Bitcoin at a production of 22.3 BTC/day compared with Riot’s 370 Bitcoin at 11.9 BTC/day and Hut 8’s 105 BTC at a rate of 3.9 BTC/day in July. Such a performance boosted MARA’s industry-leading Hold on for Dear Life stash and achieved the highest mining efficiency in terms of revenues per exahash.
Marathon Digital plans to improve its fleet efficiency by deploying S21 Pros and immersion cooling. The company’s newly acquired sites in Texas and Nebraska have improved hash rates by 25% and 15% in second-quarter 2024, respectively. It aims to reach a hash rate of 50 exahash at the end of 2024 from 31.5 exahash in the second quarter of 2024.
Flexible Data Centers Expand Market Reach
Marathon Digital has recently introduced an mining facility that can be specifically used for either Bitcoin mining or AI. As a data center operator, this implies that the company can run Bitcoin mining and will be able to move to High-Performance Computing whenever desired without changing any infrastructure. MARA is optimistic about the conversations with the Original Equipment Manufacturers on the AI side as they are akin to this concept since it allows customers to deploy infrastructure and have it going for AI while utilizing it for Bitcoin mining in the near term.
We anticipate such an innovation to broaden the company’s market reach, thereby leading to increased revenues. Such a customer-orient initiative can be expected to foster loyalty and attract business.
Kaspa Mining Enhances MARA’s Portfolio
Marathon Digital revealed that it is venturing into mining Kaspa, the fifth-largest proof-of-work digital asset. The company has already acquired 60 petahash of miners to mine Kaspa and expects full deployment by the third quarter of 2024.
Venturing into Kaspa mining is expected to positively impact Marathon Digital’s top line and profitability due to the high margins associated with mining Kaspa. By broadening its mining portfolio, MARA aims to strengthen its market position and lower the risks associated with relying solely on Bitcoin mining.
Marathon Digital anticipates Kaspa to consume only 1% of its energy capacity. MARA currently mines Kaspa at 80% plus margins, which is highly accretive as those margin dollars can be used for everything from covering general and administrative expenses to acquiring Bitcoin in the open market.
Marathon Digital’s Liquidity Stronger Than Peers
MARA has a strong liquidity position. It reported a current ratio of 3.75 at the end of the second quarter of 2024. This is compared with the industry average of 0.95. A current ratio above 1 indicates that the company is well-positioned to meet its obligations. A strong liquidity position enables Marathon Digital with the financial flexibility to capitalize on growth opportunities and navigate through looming market fluctuations.
MARA’s Top-Line Growth Prospects & Bottom-Line Challenges
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $672.3 million, suggesting a 77.3% surge from the year-ago quarter’s actual. Sales are anticipated to continue ascending, with 43% year-over-year growth in 2025.
Marathon Digital Holdings, Inc. Revenue (TTM)
Marathon Digital Holdings, Inc. revenue-ttm | Marathon Digital Holdings, Inc. Quote
However, despite the strong revenue growth prospects, the company’s bottom-line picture appears less optimistic. Marathon Digital is expected to report a loss of 20 cents per share in 2024, which indicates a more than 100% year-over-year decline. Earnings in 2025 are expected to dip more than 100% year over year as well. This suggests that while the company’s top line is thriving, its profitability is under pressure, which could lead investors to take a more cautious approach.
Evaluating the Right Entry Point
Although a substantial increase in MARA’s stock price has been observed over the past year, the recent price declines suggest that it is currently undergoing a correction, indicating that waiting for a more advantageous entry point could yield better returns for investors. The company’s efficient mining capabilities, portfolio diversification initiatives, industry-beating liquidity position and positive top-line expectations highlight its potential for sustained growth, making it an obvious investment in the long term. However, potential investors should remain patient and watch for further adjustments in Marathon Digital’s stock price to find the right entry point.
MARA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.