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, 2021, the company changed its name to Marathon Digital Holdings. On April 26, 2021, Fred Thiel replaced Merrick Okamoto as CEO. Thiel also became chairman on Jan. 1, 2022.
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.
The price of Bitcoin is hovering around $21,000. Bitcoin previously surged to around $44,249 on March 1, 2022, as governments around the world intensified economic sanctions on Russia for invading Ukraine. Some experts believe Bitcoin could be seen as a safe haven for Russians and Ukrainians to get money out of their respective countries.
However, Bitcoin has recently been trading along the same pattern as stocks.
CEO Open To Acquisition
In a March 31 interview with Bloomberg, CEO Thiel said he would consider an offer at “the right price.”
“If somebody offers us a huge premium over our market cap, I have to take it under consideration, and that may be the right thing to do for the investors,” he added.
Thiel says energy firms are in prime position to take over Bitcoin miners.
“A generating company can sell their electricity to themselves at a lower cost, so they would be the most profitable Bitcoin miner over time,” he explained.
Crypto Regulations Coming
Democratic Sen. Kirsten Gillibrand and Republican Sen. Cynthia Lummis on June 7 introduced the first major bipartisan legislation to regulate cryptocurrency. The bill classifies digital assets as commodities like wheat or oil and tasks the Commodity Futures Trading Commission to regulate them.
The Responsible Financial Innovation Act is a key first step to structure the markets for digital assets with legal definitions.
The bill is a “landmark bipartisan legislation that will create a complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust consumer protections while integrating digital assets into existing law,” their offices said in a statement.
“The United States is the global financial leader, and it’s absolutely critical the U.S. plays a leading role in this new frontier,” Lummis said in a tweet June 7.
MARA stock and other bitcoin plays fell on the news.
The bill follows President Biden’s March 9 executive order calling on the federal government to examine the risks and benefits of cryptocurrencies.
“The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system, and the climate,” the White House said in a statement.
The order lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
Marathon Digital’s Mining Power Grows
On March 4, Marathon reported it produced 360.3 self-mined bitcoin during February 2022, a 729% increase from 43.4 self-mined bitcoin in February 2021.
The company said it increased total bitcoin holdings to around 8,956 BTC with a fair market value of approximately $386.8 million.
Marathon has about $106.4 million in cash on hand. Total liquidity, defined as cash and bitcoin holdings, was approximately $493.2 million.
The company said it received some 7,600 top-tier ASIC miners from Bitmain in February, adding to its existing mining fleet of 35,510 active miners. As of June 2022, Marathon had a mining fleet of 36,830 active miners.
The company expects to have about 199,000 operational miners by early 2023.
Nevertheless, earlier this year, B. Riley analyst Lucas Pipes slashed price targets for crypto miners Marathon Digital, Riot Blockchain (RIOT), Greenidge Generation (GREE) and Stronghold Digital Mining (SDIG) due to higher-than-expected capital costs, he said in a note to clients.
Marathon Digital stock tumbled 27% on Nov. 15, 2021, after it said in a filing that it had received a subpoena from the Securities & Exchange Commission. The SEC is asking the company and certain executives to produce documents and communications concerning the Hardin, Mont., data center facility.
“We understand that the SEC may be investigating whether or not there may have been any violations of the federal securities law,” the company said in the filing. “We are cooperating with the SEC.”
On Oct. 6, 2020, Marathon Digital entered into a series of agreements with multiple parties to design and build the Hardin data center. As part of the deal, it issued 6 million of restricted Marathon common shares as part of the deal.
Marathon Digital also said on Nov. 15, 2021, that it intends to raise $500 million in senior convertible notes to buy more Bitcoin and Bitcoin miners.
MARA Stock Technical Analysis
Marathon Digital was forming a bearish head-and-shoulders pattern in early April 2021. But the stock went south from there, and no new pattern has formed.
MARA shares are closely tied to Bitcoin prices, so they have been on a wild ride. MARA stock hit a 52-week high of 83.45 on Nov. 9, 2021. But the stock has since pulled back significantly. Shares are now trading around $15 and above their 50-day line, according to MarketSmith chart analysis.
Shares fell as much as 5.5% on June 21, 2021, as Bitcoin’s value dropped to below $33,000 amid an intensifying Chinese crackdown on Bitcoin mining. On Sept. 24, 2021, China banned all cryptocurrency transactions. The move sent the value of Bitcoin down $2,000.
Meanwhile, the Biden administration on July 15, 2021, 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.
But the launch of a Bitcoin futures ETF and the prospect of others to follow fueled the crypto’s race to a fresh high on Oct. 20, 2021, to above $66,000.
MARA stock popped 19% to an all-time high of 75.96 on Nov. 8, 2021, as the price of Bitcoin surged 6.8% vs. 24 hours prior, to $84,107. However, Bitcoin prices dropped dramatically since then to around $24,000.
Wall Street Interest
Wall Street was keen to add MARA stock to holdings in 2021. A bunch of Bitcoin ETFs hit the market last year. On Oct. 19, 2021, ProShares Bitcoin Strategy ETF (BITO) began trading on the NYSE, while Valkyrie Bitcoin Strategy ETF (BTF) started trading Oct. 22, 2021.
The SEC also approved on Oct. 5, 2021, the Volt Crypto Industry Revolution and Tech ETF, in which MARA stock is expected to be among the holdings.
According to ETF.com, BlackRock’s iShares Russell 2000 ETF (IWM) is the top holder of MARA, with 2.26 million shares. Meanwhile, BlackRock’s iShares Russell 2000 Value ETF (IWN) has around 962,000 shares.
BlackRock (BLK), the world’s largest asset manager, said it had taken a 6.6% stake in the company. Vanguard Group has 9% ownership.
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 Stock Fundamental Analysis
The company missed Q2 earnings views. It reported a loss of $1.75 a share. FactSet analysts had expected a 7-cents-a-share loss vs. a loss of $1.09 in the year-ago period.
Management said the deeper net loss was primarily related to the decline of bitcoin’s price in the second quarter of 2022 and the accelerated recognition of expenses related to the previously announced exit from the Hardin, Mont., facility, partially offset by a gain on sale of equipment.
The company had sales of $24.9 million, also missing views. Wall Street had expected $38.8 million. Shares fell 2.4% after hours. MARA stock had climbed 1.8% in regular trading.
Meanwhile, Marathon Digital increased total Bitcoin holdings to 10,055 BTC as of June 30. Total bitcoin holdings increased to 10,127 BTC with a fair market value of $236.3 million as of July 31. Total cash on hand was $120.7 million.
With losses still piling up, MARA stock has an EPS Rating of 31 out of a possible 99.
MarketSmith shows MARA stock has an Accumulation/Distribution grade of A+, which indicates a strong amount of buying by institutional investors. With 26% fund ownership, 304 funds own MARA stock as of June 2022.
Q2 Bitcoin Production
Marathon Digital produced 707 self-mined bitcoin during Q2 2022, down 44% from Q1 but up 8% year over year.
CEO Fred Thiel said the company “continued to work through several operational obstacles” in Q2.
“Energization delays, maintenance and weather issues in Montana, and an approximately 56% decline in the price of bitcoin during the quarter, severely impacted our bitcoin production and financial results,” he said in a statement following earnings.
To help mitigate this issue, on July 18, Marathon Digital said it signed hosting agreements with third parties that will provide a total of up to 254 megawatts of power and capacity.
Nevertheless, these items reduced Marathon Digital’s revenue, resulting in a $127.6 million impairment on its bitcoin holdings and decreased fair market value of its investment fund by $79.7 million.
Mara signed a new deal with Applied Blockchain (APLD), additional agreements with existing partner Compute North and a variety of other providers.
Year-to-date Marathon produced 1,966 bitcoin, a 132% increase over the same period in the prior year. The total number of miners installed and awaiting energization at Texas facilities increased to 29,640 miners.
Total bitcoin holdings are 10,055 BTC with a fair market value of $198.9 million, a significant decrease as Bitcoin prices plunged in the last month. In May, its bitcoin holdings totaled 9,941 BTC with a fair market value of $315.1 million.
Cash on hand was approximately $88.7 million. Total liquidity, defined as unrestricted cash and available credit acilities, was approximately $153.7 million. Both increased significantly vs. last month. In May, cash on hand was around $59.6 million and total liquidity was about $86 million.
Is MARA Stock A Buy Now?
The volatility of MARA stock, largely due to its link to Bitcoin, makes it a risky investment. Marathon Digital also has no track record yet of strong, consistent earnings and revenue growth.
Bottom line: Marathon Digital stock popped 21% after releasing June Bitcoin production data. But MARA stock is not a buy after missing Q2 earnings and since has not formed any discernible pattern. Additionally, Bitcoin prices fell to around $24,000 in recent days. Still, 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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