Is MARA Stock A Buy After Topping Earnings Views? Here’s What Marathon Digital Stock Chart Shows
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.
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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, the company changed its name to Marathon Digital Holdings. On April 26, Fred Thiel replaced Merrick Okamoto as CEO.
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.
Meanwhile, a bunch of Bitcoin ETFs are hitting the market. on Oct. 19, ProShares Bitcoin Strategy ETF (BITO) began trading on the NYSE, while Valkyrie Bitcoin Strategy ETF (BTF) started trading Oct. 22. VanEck’s Strategy ETF (XBTF) is next in line.
The SEC also approved on Oct. 5 the Volt Crypto Industry Revolution and Tech ETF, in which MARA stock is expected to be among the holdings.
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Marathon Digital’s Mining Power Grows
In October, Marathon produced 417.7 bitcoins, a 23% jump vs. the previous month. That boosted the value of the company’s total bitcoin holdings to about $457.4 million, the bitcoin miner said.
Marathon Digital now has 7,453 bitcoins. Its mining fleet consists of 27,280 active miners.
Marathon also said that it had received 42,381 top-tier ASIC miners from Bitmain this year with another 3,285 ASIC miners in transit.
The company expects to have about 133,000 operational miners by mid-2022.
Rival Riot Blockchain (RIOT) produced 491 BTC in the first quarter. However, Riot is one of the most profitable mining companies in the sector, with a 67.6% gross margin, while Marathon Digital posted negative gross profit margin of -498.9% in Q1.
Growing Installation Base
Marathon Digital plans to increase machine installations over the next several months. It anticipates delivery of 75,000 miners by the end of this year, with an additional 15,200 in January 2022. Marathon Digital expects to have a total of 103,120 miners by Q1 2022. With this mining capacity, it expects to produce 55-60 Bitcoin per day.
Dede wrote in an April 12 report that Marathon’s average cost per mining machine is $2,300, which is considerably lower than the $7,999-$18,500 he’s seen others pay.
On May 24, Marathon Digital inked a deal with Compute North to host about 73,000 of its Bitcoin miners as part of a new 300-megawatt data center in Texas. Marathon will provide Compute North with an 18-month bridge loan of up to $67 million to build the facility. The project is expected to begin in October 2021.
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MARA Stock Technical Analysis
Marathon Digital was forming a bearish head-and-shoulders pattern in early April. But the stock went south from there, and no new pattern has formed. However, MARA stock has found support at its 200-day line, which is a positive sign.
MARA shares are closely tied to Bitcoin prices, so they have been on a wild ride. At the beginning of the year, MARA stock was trading around 10. As Bitcoin surged, the stock reached a high of 57.75 on April 6.
Shares popped 15% on July 26 as the price of Bitcoin climbed back over $39,000, but gave back most of those gains on July 27. MARA stock is trading above its 50-day line, according to MarketSmith chart analysis.
Shares fell as much as 5.5% on June 21 as Bitcoin’s value dropped to below $33,000 amid an intensifying Chinese crackdown on Bitcoin mining. On Sept. 24, China banned all cryptocurrency transactions. The move sent the value of Bitcoin down $2,000.
Meanwhile, the Biden administration on July 15 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 to above $66,000.
MARA stock popped 19% to an all-time high of 75.96 on Nov. 8, as the price of Bitcoin surged 5.5% vs. 24 hours prior to $65,733.
MARA stock’s relative strength line spiked up with the stock’s rise on Nov. 8. Marathon Digital has a top-notch RS Rating of 99 and a Composite Rating of 87.
An Accumulation/Distribution grade of A+ indicates heavy buying by institutional investors.
Wall Street Interest
But Wall Street appears keen on the company’s stock lately. MARA stock gapped up 6.5% on Aug. 20 on news that BlackRock (BLK), the world’s largest asset manager had taken a 6.7% stake in the company in June.
According to ETF.com, BlackRock’s iShares Russell 2000 ETF (IWM) is the top holder of MARA, with 2.14 million shares. Meanwhile, BlackRock’s iShares Russell 2000 Value ETF (IWN) ranks as the third top holder of MARA stock.
MARA stock jumped 27% in the days following the Aug. 4 news that Fidelity had bought a 7.4% stake in Marathon Digital.
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).
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MARA Stock Fundamental Analysis
Marathon Digital reported better-than-expected Q3 earnings on Wednesday. It posted EPS of 85 cents, beating estimates of 48 cents, and swinging from a loss of 6 cents a share in the year-ago quarter. Marathon Digital posted revenue of $51.71 million for the quarter ended September 2021, missing estimates by 31%.
Marathon had 654 bitcoins in Q2, bringing 2021 production to 846 newly minted bitcoins. Then in July, Marathon produced 442.2 more bitcoins.
As of Aug. 12, Marathon produced 1,441 bitcoins, bringing the total amount of bitcoins to 6,378.
As of June 30, 2021, the carrying value of Marathon’s mined digital assets was $29.0 million, reflecting cumulative impairment charges of $11.7 million.
With losses still piling up, MARA stock as an EPS Rating of 20 out of a possible 99.
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Is MARA Stock A Buy Now?
The volatility of MARA stock, largely due to its link to Bitcoin, makes it a risky investment. On May 20, news that the Biden administration could start requiring transaction above $10,000 to be reported to the IRS sent the value of Bitcoin and other crypto currencies down.
Meanwhile, on May 24, Marathon Digital Executive Chairman Merrick Okamoto said in a tweet he had met with other bitcoin mining executives the previous weekend. The group, which included Tesla (TSLA) CEO Elon Musk and MicroStrategy (MSTR) CEO Michael Saylor, formed a Bitcoin Mining Council to promote energy usage transparency and accelerate sustainability initiatives.
Marathon Digital also has no track record yet of strong, consistent earnings and revenue growth.
Bottom line: Marathon Digital is not a buy as it has not formed any discernible pattern. Investors could have considered jumping in as it appeared to break a trend line with 44.97 as a resistance area. But the stock is now quite a bit above its 50-day line and extended. Still, investors should keep an eye on MARA stock, as it has amassed an impressive arsenal of computing power.
Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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