One thing we could say about the analysts on Marathon Digital Holdings, Inc. (NASDAQ:MARA) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. The stock price has risen 4.6% to US$12.99 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the downgrade, the current consensus from Marathon Digital Holdings' seven analysts is for revenues of US$248m in 2022 which - if met - would reflect a major 28% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 59% to US$0.51. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$277m and losses of US$0.38 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 8.0% to US$18.75, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Marathon Digital Holdings at US$35.00 per share, while the most bearish prices it at US$7.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Marathon Digital Holdings' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 39% growth on an annualised basis. This is compared to a historical growth rate of 81% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% annually. So it's pretty clear that, while Marathon Digital Holdings' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Marathon Digital Holdings.
There might be good reason for analyst bearishness towards Marathon Digital Holdings, like dilutive stock issuance over the past year. Learn more, and discover the 2 other flags we've identified, for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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