Cryptocurrency miner Marathon Digital Holdings (MARA) has been volatile as the price of Bitcoin fluctuates wildly. Here is what the fundamentals and technical analysis say about buying MARA stock now.
Marathon is a digital asset technology company that mines cryptocurrencies, focusing on the blockchain ecosystem and the generation of digital assets.
The company started out in 2010 as Marathon Patent Group, when it began collecting patents related to encryption. MARA stock began trading in 2013. On March 1, the company changed its name to Marathon Digital Holdings. On April 26, Fred Thiel replaced Merrick Okamoto as CEO.
Marathon Digital provides the computing power needed to mine Bitcoins. Bitcoin mining consists of processing, or validating, transactions. The speed at which a digital currency miner processes transactions is called hash rate. The faster a miner can process transactions, the more revenue it generates.
Marathon Digital is paid in Bitcoin for mining. The company can then sell this Bitcoin to generate revenue. Marathon Digital also funds its operations through financing.
Marathon Digital’s Mining Power Grows
On Aug. 1, the company reported that it had produced 442.2 bitcoins during July 2021, increasing total bitcoin holdings to approximately 6,225.6 with a fair market value of approximately $260.7 million.
Cash on hand reached $91.9 million, and total liquidity, defined as cash and bitcoin holdings, was approximately $352.6 million.
Marathon also announced it purchased an additional 30,000 S19j Pro miners from Bitmain, which is expected to increase Marathon’s mining operations to 133,000 miners producing approximately 13.3 EH/s once all miners are deployed.
Rival Riot Blockchain (RIOT) produced 491 BTC in the first quarter. However, Riot is one of the most profitable mining companies in the sector, with a 67.6% gross margin, while Marathon Digital posted negative gross profit margin of -498.9% in Q1.
Marathon Digital plans to increase machine installations over the next several months. It anticipates delivery of 75,000 miners by the end of this year, with an additional 15,200 in January 2022. Marathon Digital expects to have a total of 103,120 miners by Q1 2022. With this mining capacity, it expects to produce 55-60 Bitcoin per day.
Dede wrote in an April 12 report that Marathon’s average cost per mining machine is $2,300, which is considerably lower than the $7,999-$18,500 he’s seen others pay.
On May 24, Marathon Digital inked a deal with Compute North to host about 73,000 of its Bitcoin miners as part of a new 300-megawatt data center in Texas. Marathon will provide Compute North with an 18-month bridge loan of up to $67 million to build the facility. The project is expected to begin in October 2021.
MARA Stock Technical Analysis
Marathon Digital was forming a bearish head-and-shoulders pattern in early April. But the stock went south from there, and no new pattern has formed.
The stock jumped 27% to 36.46 in the days following the Aug. 4 news that Fidelity had bought a 7.4% stake in Marathon Digital.
Fidelity will spread the shares of the mining firm across four index funds: Fidelity Extended Market Index Fund (FSMAX), Fidelity Nasdaq Composite Index Fund (FNCFX), Fidelity Total Market Index Fund (FSKAX) and Fidelity Series Total Market Index Fund (FCFMX).
MARA shares are closely tied to Bitcoin prices, so they have been on a wild ride. At the beginning of the year, MARA stock was trading around 10. As Bitcoin surged, the stock reached a high of 57.75 on April 6.
Shares popped 15% on July 26 as the price of Bitcoin climbed back over $39,000, but gave back most of those gains on July 27. MARA stock is trading above its 50-day line, according to MarketSmith chart analysis.
Shares fell as much as 5.5% on June 21 as Bitcoin’s value dropped to below $33,000 amid an intensifying Chinese crackdown on Bitcoin mining. On June 22, MARA stocks gapped down another 7% as the price of Bitcoin fell below $30,000.
Meanwhile, the Biden administration on July 15 said it formed a task force to crack down on the use of cryptocurrency in ransomware attacks. Its effort will focus on tracing proceeds paid to hackers.
MARA stock jumped 6.5% to 30.02 on June 28, as it joined the Russell 2000 Index.
An Accumulation/Distribution grade of A- indicates moderate to heavy buying by institutional investors.
MARA Stock Fundamental Analysis
Marathon Digital posted a 20-cents-a-share loss in the first quarter. That compares with a 12-cent loss in the year-ago period and missed views for EPS of 2 cents.
Marathon’s net income came in at $83.4 million, however when you factor in the more than 4,800 Bitcoin it bought in January, the company reported a $137 million paper gain by the end of the quarter.
Sales came in at $9.2 million, compared to $590,000 last year and missed estimates by 19%.
With losses still piling up, MARA stock as an EPS Rating of 53 out of a possible 99.
But analysts expect the company to swing to a profit in Q2 with EPS of 29 cents and revenue to balloon to $43.5 million.
Is MARA Stock A Buy Now?
The volatility of MARA stock, largely due to its link to Bitcoin, makes it a risky investment. On May 20, news that the Biden administration could start requiring transaction above $10,000 to be reported to the IRS sent the value of Bitcoin and other crypto currencies down.
Meanwhile, on May 24, Marathon Digital Executive Chairman Merrick Okamoto said in a tweet he had met with other bitcoin mining executives the previous weekend. The group, which included Tesla (TSLA) CEO Elon Musk and MicroStrategy (MSTR) CEO Michael Saylor, formed a Bitcoin Mining Council to promote energy usage transparency and accelerate sustainability initiatives.
Marathon Digital also has no track record yet of strong, consistent earnings and revenue growth.
Shares have lost about half their value since hitting a high in April.
Bottom line: Marathon Digital is not a buy. Although investors could have jumped in as it bounced off its 50-day line, the stock is now extended. But investors should keep an eye on MARA stock, as it has amassed an impressive arsenal of computing power.
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Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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