Bitcoin miners experienced a bit of a downturn following the recent halving event. For example, companies like Marathon Digital (MARA) reported a wider-than-expected loss due to decreased Bitcoin production and an unfavorable mark-to-market adjustment of digital assets. Nonetheless, the company anticipates a rise in its hash rate to 50 exahashes per second by the end of 2024 from 31.5 EH/s reported in the second quarter. It looks for a rebound, with Bitcoin climbing back above $60,000.
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Furthermore, the company’s expansion into mining Kaspa, a high-margin cryptocurrency, could provide additional revenue and enhance its competitive edge. The stock is down 26% in the past 90 days. It trades at a discount to industry peers, suggesting a window of opportunity for value investors interested in Bitcoin exposure and crypto mining to buy on the dip.
Marathon Diversifies Mining Operation
Marathon Digital Holdings specializes in cryptocurrency mining and digital asset technology.
The company recently diversified its digital asset portfolio by mining Kaspa (KAS). This proof-of-work digital asset is the fifth largest by market cap at $3.9 billion, boasting around $64.8 million in daily trading volume. Uniquely, Kaspa uses BlockDAG technology, allowing for multiple blocks to be processed at once, leading to faster transactions and the potential for higher block reward earnings compared to assets like Bitcoin. Marathon reported mining 93 million KAS, valued at around $15 million, through the end of June.
Marathon’s robust infrastructure, strong financials, hardware manufacturing partnerships, and industry expertise uniquely position it to exploit proof-of-work ecosystems.
Analysis of Marathon’s Recent Financial Results
The company recently presented its financial results for Q2 2024. Revenue of $145.1 million marked a 78% increase from $81.8 million in Q2 2023, though it fell short of analysts’ expectations of $161.03 million. However, net loss has increased by $9 million year-over-year to $199.7 million. This decline is primarily driven by an unfavorable fair value of digital assets due to the newly adopted accounting rules by the Financial Accounting Standards Board (FASB).
Adjusted EBITDA also dropped, from a gain of $35.8 million in Q2 2023 to a loss of $85.1 million in Q2 2024. The company’s reported earnings per share of -$0.19 fell short of analysts’ expectations of -$0.14.
The company secured $292.5 million from the sale of 2.125% convertible senior notes due 2031 and used a portion of the proceeds to acquire 4,144 bitcoins. The remaining funds will be directed towards acquiring additional bitcoins and supporting general corporate purposes.
What Is the Price Target for MARA Stock?
MARA stock has been prone to significant volatility, with a beta of 3.35, as it bounced its way to posting a 46.24% return over the past year. It trades below the middle of its 52-week price range of $7.16 – $34.09 while demonstrating negative price momentum by trading below the 20-day (17.89) and 50-day (19.23) moving averages.
Analysts following the company have taken a cautious stance on the stock. For instance, B. Riley analyst Lucas Pipes, a five-star analyst according to Tipranks’ ratings, recently lowered the price target from $20 to $19 while maintaining a Neutral rating on the shares, noting the company’s new hash rate targets and the recent share dilution.
Based on seven analysts’ recommendations and price targets, Marathon Digital is rated a Hold. The average price target for MARA stock is $21.00, representing a potential upside of 27.74% from current levels.
Closing Thoughts on MARA
Despite recent challenges, Marathon Digital is positioned for a potential rebound with a rise in its hash rate and expansion into mining Kaspa. Although recent financial results fell short of expectations, the company’s strategic moves and the stock trading at a discount signal a potential opportunity for value-focused investors.
