Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Brief Breakdown: Marathon Digital Holdings Inc. (NASDAQ: MARA)

ca.investing.com/analysis/brief-breakdown-marathon-digital-holdings-inc-nasdaq-mara-200500650
Brief Breakdown: Marathon Digital Holdings Inc. (NASDAQ: MARA)
By Green Candle Investments   |  Feb 14, 2022 08:42
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Author's Note: In our Brief Breakdowns, we pick a stock and take opposite sides – one of us presents the bullish argument and the other presents the bearish argument.

Company Description and Qualitative Analysis

Marathon Digital Holdings Inc (NASDAQ:MARA). is a bitcoin mining company with operations located in the United States. Marathon Digital started by collecting patents related to encryption and shifted its business in 2020 to focus on bitcoin mining. It currently has the largest market cap of any publicly traded bitcoin mining company. As we detail below, the company and industry are both growing rapidly. Because Marathon is currently the largest market cap of any company in the space, it is primed for massive movement in a very large and rapidly growing space.

Quantitative Analysis

At the time of this writing (2/13/2022), MARA is trading at $26.93 with a 52 week range of $18.32 - $83.45 and a market cap of $2.76B USD. In Q3 of 2021 revenues increased 76% compared to Q2 and 6,091% year-over-year to $51.7 million. MARA produced 1,252 self-mined bitcoin which was a 91% increase from 654 bitcoin from the previous quarter. Non-GAAP income from operations was $43.5 million. Return of equity (ROE: Net Income / Total Equity *100) of MARA is -9.47% and net margin (net income / revenue) is -57.03%. The debt to equities ratio (total liabilities / total equity) is 0.01. You can view MARA’s last quarterly earnings here and latest 10K here. Below we have percent returns denominated in both USD and in Bitcoin.

1
1

2
2

Bullish Thesis

Here are three points to support the bullish thesis:

  • Opportunity to be a “first mover” in an emerging industry: At $2.8B, Marathon is one of the largest bitcoin mining companies in North America by market cap. Their January 2022 hashrate of 3.6 exahash per second (EH/s) puts them ahead of competitors like Riot Blockchain (3.4 EH/s), Hut 8 (2.4 EH/s), BitFarms (2.3 EH/s), and HIVE Blockchain (1.87 EH/s). Not only are they a dominant player in the industry now, but their continued effort toward expansion will very likely increase their market share going forward. By early 2023, they expect to have 199,000 miners online and a hashrate of 23.3 EH/s - this would leave many of their competitors in the rearview mirror. Having this much momentum in a relatively young market gives Marathon a first mover advantage over younger companies entering the industry.

  • Commitment to growth: In Q2 of 2020, Marathon purchased 10,500 S19 Pro miners from Bitmain. They followed this with the purchase of an additional 90,000 miners in Q4 of the same year. In Q2 of 2021, they announced a partnership with Compute North to build a new mining facility that would host 73,000 machines and be 100% carbon neutral. In December, Marathon announced that they had struck a deal to purchase an additional 78,000 S19 miners from Bitmain for approximately $879 million. These new miners are expected to be delivered and brought online throughout 2022 and they expect to have 199,000 miners fully operationally by early 2023. This would increase Marathon’s hashrate by nearly 600% to ~23.3 EH/s. These expansions demonstrate the company’s commitment to spending money on growth - at this early stage in the mining industry, I think their commitment to growth will put them well ahead of their current competitors and future companies looking to break into the market.

  • Positive news on regulatory stability: Over the last several months we’ve seen more and more regulatory bodies take a positive stance toward bitcoin mining operations. This year alone, in both India and Russia, central banks suggested blanket bans on cryptocurrency miners before legislative bodies stepped in and opted instead for regulatory responses. In the U.S., where Marathon operates, the regulatory landscape remains uncertain, however there appear to be a growing number of legislators who hold positive views toward Bitcoin and bitcoin mining. Of particular note, senators Ted Cruz (Texas) and Cynthia Lumis (Wyoming) have given vocal support to members of the bitcoin mining community. Texas Gubernatorial candidate Don Huffines claimed that he wants to make his state the “citadel for Bitcoin” and Senate candidate Josh Mandel tweeted that Ohio must be a “pro-bitcoin state.” So, although the regulatory landscape remains uncertain, there is no doubt that the U.S. is seeing a rise in the number of pro-bitcoin politicians. In my opinion, this is bullish for the bitcoin mining sector.

Bearish Thesis

Here are three points to support the bearish thesis:

  • Regulatory uncertainty: Currently Marathon has locations in Montana and is building one in Texas, which are both very bitcoin mining friendly states. Although the United States has historically been one of the more stable governments globally, the US could clamp down on regulations surrounding bitcoin mining for some reason. Whether it's the ESG narrative or something else, bitcoin mining has been extremely polarizing in the US political realm. I would like to see Marathon potentially venture out to another country so the business is not reliant on one specific regulatory body.

  • Over Reliance on Mining Rig Manufacturers: Marathon does not develop any of their bitcoin miners therefore is reliant on companies developing bitcoin miners for their business. As mentioned above on the regulatory uncertainty, I do not like the fact that a company relies heavily on third-parties to dictate their business. This is a large enough industry that they should be able to manage this risk, but if you decide to invest in Marathon this should be on your radar.

  • Bitcoin Failing: As a bitcoin guy this is difficult for me to see, but it is a risk that investors should be aware of. As long as bitcoin is in circulation, btc needs miners in order for the network to survive. If bitcoin fails, so will bitcoin miners. So investors are taking bets that both these scenarios will not happen. With the industry being as large as it is, I find it hard to believe that bitcoin fails.

Visit Green Candle Investments for more stock, sector, and cryptocurrency analysis.

Brief Breakdown: Marathon Digital Holdings Inc. (NASDAQ: MARA)
 

Related Articles

FactSet Research Systems Inc
Podcast : Financial Market Preview - Friday 24-June By FactSet Research Systems Inc - Jun 24, 2022

US Futures are indicating a higher open. European equity markets have opened stronger, following positive performance in Asia. Market narrative is shifting from supply-chain...

Brief Breakdown: Marathon Digital Holdings Inc. (NASDAQ: MARA)

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email