MARA Stock Outlook: The Bull and Bear Case for Marathon Digital

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In 2018, Marathon Patent Group, initially accused of patent trolling, pivoted to Bitcoin mining, later rebranding as Marathon Digital Holdings (NASDAQ:MARA) in early 2021. Despite skepticism, a $2,000 investment on February 7, 2018, grew to $14,357 by November 2021 during the growth stock rally. Today, that investment would still be worth around $5,000. This may be important for MARA stock holders moving forward.

Additionally, Marathon Digital stands as a crypto mining option tied to Bitcoin’s (BTC-USD) upward trajectory. Despite a higher production cost per Bitcoin around $19,000, Marathon exhibited substantial growth, mining 3,490 Bitcoins in Q3 2023, a 467% increase from the previous year. Net income reached $64 million.

So is MARA a buy or sell at this point? Let’s look at the bull and bear sentiments.

The Bull Case

Bitcoin miner Marathon Digital plans expansion as Bitcoin rebounds into 2024. MARA stock surged around 180% in a nine-week run from early October, coinciding with Bitcoin’s 52% climb to nearly $43,000. Marathon Digital processes and validates Bitcoin transactions, considering its mined cryptocurrency as revenue. 

As of November 30, MARA stock held 14,025 unrestricted bitcoins and chose to sell 700 BTC, or 59% of monthly production, to cover expenses. It intends to sell a portion of BTC holdings for future operations. By the end of November, Marathon Digital had $273.1 million in cash and equivalents. Unrestricted cash, equivalents, and bitcoin increased to $802.3 million from $620.3 million. 

On December 19, Marathon Digital announced the purchase of two bitcoin mining sites for $178.6 million in cash, increasing mining capacity by 56% to 910 megawatts. The deal, expected to close in Q1, makes Marathon directly own 45% of its mining sites.

The Bear Case

After Bitcoin’s recent recovery, Marathon Digital witnessed a significant surge. Despite optimistic signs with rising BTC prices and record production, subdued enthusiasm, coupled with high overhead costs, led to analysts projecting a shift from positive to negative earnings this year.

One crucial factor to consider is the Bitcoin halving that occurred in April 2024, reducing the mining reward from 6.25 to 3.125 BTC per block for Marathon Digital. While this halving impacts revenue, it could boost Bitcoin’s price due to supply and demand dynamics. Marathon’s ability to offset reduced production with potential Bitcoin investment gains hinges on market perception.

Marathon’s stock is currently priced optimistically, factoring in high expectations. This makes it susceptible to significant price drops if factors favoring the company, such as BTC trends, shift. Consider selling or avoiding MARA to manage potential risks.

Caution is Advised

Despite increased mining costs, Marathon sustained profitability. With Bitcoin around the $46,000 mark, as 2024 begins, it’s likely to remain profitable next year. Marathon’s expanding network hash rate positions it well to benefit from the overall growth of crypto mining in North America.

But, knowing it carries risks, caution is advised for investors looking to add MARA stock as a speculative buy right now.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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