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Marathon: Higher Bitcoin Price Merits Higher Valuation

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TipRanks
·2 min read
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There’s no stopping Bitcoin right now. BTC is now trading at all-time highs and dragging any satellite companies associated with it along for the ride. Case in point: Shares of bitcoin miner Marathon (MARA) skyrocketed 67% this week, taking 2021’s tally to a year-to-date gain of 260%.

The rising bitcoin price has demanded a rethink from H.C. Wainwright analyst Kevin Dede regarding his Marathon model.

Accordingly, Dede increased his 2021 estimates from the prior revenue forecast of $161.2 million and EPS of $1.10 to $195.7 million and $1.20, respectively.

Bitcoin is known for its volatility and an investment in it requires dealing with the prospect of massive drops as well as the huge forward strides. Dede points out that from an analyst’s perspective, keeping pace and “offering forecasts” due to the “rash unpredictability and the weak relationship between bitcoin price and network hash” is no easy task, either.

The problem right now is that Dede’s forecast is based around Bitcoin’s price remaining stable in the $35,000 price range. The recent surge beyond that level further enhances his point.

“One might argue a flattish view forward on price could be read as conservative in light of the overarching economic environment and bitcoin's ‘promotion’ to alternative asset by leading investment houses,” the 5-star analyst says.

The company might be focused on mining Bitcoin, but it recently invested $150 million of the $250 million of capital it raised in January in acquiring 4,812.66 BTC.

Not only does the purchase allow Marathon to further reap the benefits of a rising Bitcoin price, Dede says, it also provides a “solid platform from which to offer financial instruments to hedge both its long position and its mining efforts against network hash rate, bitcoin price, and electricity rates should its next facility be subject to power cost changes.”

To this end, Dede rates MARA shares a Buy along with a $30 price target. However, the stock’s latest moves have sent the share price beyond Dede’s target, which now represents 23% downside from current levels. It will be interesting to see whether the analyst downgrades his rating or keep upgrading his target. (To watch Dede’s track record, click here)

Marathon still appears to be flying under Wall Street’s radar and Dede’s is currently the sole analyst review on record. (See MARA stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.