MARA Stock Outlook: Marathon Digital’s Long-Term Bet on Bitcoin’s Rise
Marathon Digital Holdings (NASDAQ:MARA) regained all the momentum it lost at the end of 2023 and into January 2024. With that, the MARA stock outlook has improved. Bitcoin (BTC:USD) surged past $50,000 on Feb. 12, hitting a two-year high. Plus, the Securities and Exchange Commission approved bitcoin ETFs on Jan. 11, sending demand for the cryptocurrency through the roof.
Higher bitcoin prices increase the value of MARA-mined bitcoins. On Nov. 10, 2021, bitcoin hit $68,789.63. Care to guess what MARA’s share price was on that day? $79.19. It hit a five-year high of $83.45 the day before, putting its market cap at $18.6 billion, 3.2x higher than in 2024. Could Marathon get back there in 2024? Yes, if it does these two things.
The MARA Stock Outlook: Capacity is a Factor
Suggesting that something time-consuming and expensive would be a near-term catalyst for pushing its share price higher might seem counter-intuitive. However, like any good business, revenue growth has to be a part of the big picture.
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Marathon can’t just rely on the 15,741 bitcoins it had at the end of January. Based on a bitcoin price of $51,316, they’re worth $807.76 million, but its market cap is $5.73 billion, 7.1x its bitcoin holdings. It’s got to justify the gap.
That something is adding capacity and bitcoin production. The company looks to places such as the UAE (United Arab Emirates), Paraguay, and Africa to provide some of this added capacity.
“We are looking at Africa,” Blockworks.co reported Charlie Schumacher’s comments earlier in February. Schumacher is Marathon Digital’s vice president of corporate communications. “We believe that bitcoin mining is, among other things, a technology solution for the energy sector, and Africa may be a great place to prove out this thesis.”
As Schumacher explained, African countries can finance new power projects by establishing Bitcoin miners as new customers for the power generated.
The operations in both the UAE and Paraguay involve joint ventures with Zero Two, an Abu Dhabi developer of digital infrastructure, and Penguin Group, a Paraguay infrastructure company.
With the bitcoin halving coming in April, the company believes geographic diversity can help lower its costs before it happens.
While it might not do much for revenue in the near term, it’s a long-term vision that could pay off handsomely for shareholders.
Keep Mining More Bitcoin
Marathon’s January update said it finished the month with a total bitcoin and cash of $1.0 billion. It increased its hash rate by 7% over December to 26.4 EH (exahash), producing an average of 35 bitcoin daily, up 58% from January 2023 but down 42% from December.
The company’s operations faced several disruptions in January caused by inclement weather and equipment failures, which reduced its operational hash rate to 19.3 EH. As a result, it produced 1,084 bitcoins in January, which is 42% lower than in December.
Besides expanding geographically to grow its production footprint, it is acquiring other bitcoin mining facilities. In December, it acquired two locations in Texas and Nebraska for $178.6 million.
The acquisition increased its bitcoin mining portfolio to 910 MW (megawatts) capacity, 56% higher than previously. With these two facilities, it plans to double its hash rate to 50 EH within 18-24 months while reducing its bitcoin discovery costs by 30%.
The Bottom Line
Marathon Digital continues to strengthen its business and Bitcoin mining operations. That’s led to a 12% gain in 2024, on top of massive gains in 2023.
It’s a simple business. Produce more bitcoin each quarter, keep the costs you can control in line, and hope that bitcoin prices keep increasing. Rinse and repeat.
The Bitcoin miner’s income statement reminds me of the cannabis producer’s—negative gross margins with positive EBITDA (earnings before interest, taxes, depreciation and amortization).
However, in Marathon’s case, it has an appreciating (and depreciating) asset on its balance sheet. Bitcoin appreciation added nearly $32 million to its income statement in Q3 2023, reducing operating expenses to just $306,000. That’s what you want to see.
The question is whether you buy MARA or bitcoin itself. That’s the million-dollar question. It’s not unlike whether you buy gold or the gold miner.
Given its geographic diversification, the aggressive investor is wise to buy MARA for potential additional gains in 2024.
On the date of publication, Will Ashworth 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 InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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