Marathon Digital Holdings, Inc. (MARA – Free Report) stock has declined 15% over the past three months compared with the industry’s impressive 29% rally. Over this period, MARA’s competitors in the bitcoin-mining space, like Riot Platforms, Inc. (RIOT – Free Report) , have consolidated, and HuT 8 Corp. (HUT – Free Report) has dropped 19%.
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This analysis will explore MARA’s performance to assess whether its current levels offer an attractive entry point for investors.
Trump’s Win Should Fuel Crypto Market and MARA
We believe the stock has upside potential following Donald Trump’s election victory, fueled by investor optimism about potential pro-digital asset policies under his administration. Trump’s previous statements favoring deregulation and innovation in financial markets have sparked hopes for a more crypto-friendly regulatory environment, which could benefit companies like Marathon engaged in Bitcoin mining.
A supportive stance could reduce compliance hurdles, incentivizing further investments in the sector. The possibility of broader adoption of digital currencies under a less restrictive framework has bolstered confidence in cryptocurrency-related stocks, driving MARA’s upward momentum and reinforcing its appeal to growth-focused investors.
MARA Boosts Mining Capacity, Aims to Slash Costs
MARA continues to commit to scaling operations and enhancing efficiencies. In the third quarter of 2024, the company increased its interconnect-approved capacity by 372 MW across three Ohio data centers, positioning itself for sustained mining expansion. MARA also acquired the Hopedale and Hannibal facilities for just $270,000 per MW, significantly below the industry average of $900,000 to $1.5 million per MW.
Additionally, the company is developing a greenfield facility in Ohio, which is expected to add 150 MW of capacity. These strategic expansions support MARA’s growth and reduce reliance on third-party providers. By owning and operating 65% of its 1.5 GW compute capacity, the company aims to minimize operational risks and lower costs. This vertical integration aligns with MARA’s objective to lead the digital asset industry while maintaining flexibility in energy sourcing and operational strategy.
MARA’s Dual Strategy Balances Immediate and Long-Term Growth
MARA adopts a dual approach to Bitcoin mining, combining revenue generation with strategic asset accumulation. By leveraging its expansive and energy-efficient mining operations, the company produces Bitcoin at lower costs, ensuring consistent revenue streams. MARA retains a significant portion of the Bitcoin it mines, positioning itself to capitalize on potential price appreciation over time.
This hybrid strategy balances immediate income from Bitcoin production with long-term growth potential tied to its holdings. This approach supports operational sustainability and strengthens MARA’s financial flexibility, enhancing its appeal to investors seeking exposure to the cryptocurrency market.
MARA’s Strong Liquidity Position
Marathon’s liquidity remains robust, with a current ratio of 4 against the industry average of 2.21. A current ratio above 1 indicates that the company is well-positioned to meet its obligations. Its strong liquidity position provides the financial flexibility to pursue growth opportunities and weather potential market fluctuations.
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Top-Line Growth Prospects and Bottom-Line Challenges
The Zacks Consensus Estimate for Marathon’s 2024 revenues is $633 million, indicating 63.4% growth from the year-ago quarter. Sales are expected to continue their upward trajectory, with a projected year-over-year increase of 50% in 2025.
Despite the strong revenue growth prospects, the company’s bottom line appears less optimistic. Marathon is expected to report a loss of 24 cents per share in 2024 against earnings of 17 cents in 2023. Loss in 2025 is expected to be around 56 cents. This suggests that while the company’s top line is growing, its profitability is under pressure, which could lead investors to take a more cautious approach.
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The Right Strategy
MARA remains a cautious hold amid a mixed performance landscape. Its strategic expansion through increased mining capacity and cost-effective facility acquisitions supports long-term growth. Additionally, the prospect of a crypto-friendly regulatory environment may provide a favorable tailwind for the company. Although its revenue generation appears robust, near-term profitability continues to face challenges. The firm’s balanced approach of combining immediate income with strategic asset accumulation, along with its strong liquidity, suggests investors should hold their positions while awaiting operational improvements and a supportive market backdrop overall.
MARA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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