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
The company’s first-quarter production stats reflect the ramp-up of its miner rollout at its Hardin, Montana, facility. The facility boasts 105 megawatts of power to run an estimated mining fleet of 30,000 machines, according to H.C. Wainwright analyst Kevin Dede, who has a buy rating on MARA stock.
Marathon’s March Bitcoin production shot up to 102.3 BTC, from 43.4 BTC in February and 50.4 BTC in January. The company had 5,134.2 BTC on the books as of March 31, including the 4,812.7 it bought in January, for a total value of roughly $305 million.
Rival Riot Blockchain (RIOT) produced 491 BTC in the first quarter vs. 196 for Marathon. Riot has only 1,565 BTC on its balance sheet, although they’re all from its mining operations. 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.
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.
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.
Shares are well off their all-time high of 57.75 achieved intraday on April 6. MARA stock is also trading below its 50-day line while finding support at the 200-day line, according to MarketSmith chart analysis.
An Accumulation/Distribution grade of B- indicates moderate net buy 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%.
The company also reported it had cash and equivalents of $204.4 million as of Q1 2021. Including Bitcoin’s value at the time, liquidity totaled $503.2 million.
With losses still piling up, MARA stock as an EPS Rating of 57 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 makes it a risky investment. The company also has no track record yet of strong, consistent earnings and revenue growth.
Shares have lost more than half their value since hitting a high in April and remain in a deep slump.
Bottom line: Marathon Digital is not a buy as shares have not formed any discernible pattern with a buy point. But investors should keep an eye on MARA stock, as it has amassed an impressive arsenal of computing power.
Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
YOU MAY ALSO LIKE: