Decarbonization Pressures And Bitcoin Volatility Will Undermine Long-Term Prospects

Key Takeaways

• Heightened regulatory scrutiny, sustainability demands, and rapid hardware cycles could increase costs and squeeze margins for MARA's energy-intensive crypto mining operations.
  
• Dependency on volatile crypto markets and increased competition may erode revenue stability, market share, and long-term profitability.
  
• Vertical integration, energy partnerships, and diversified technology investments position MARA Holdings for margin improvement, revenue stability, and reduced dependence on volatile Bitcoin mining cycles.

Catalysts

Operates as a digital asset technology company in the United States.

• Intensifying global focus on sustainability and decarbonization is likely to create heightened regulatory scrutiny and increasing compliance costs for energy-intensive operations like MARA's off-grid mining initiatives, which could significantly raise operational expenses and erode net margins over time.
  
• The potential mainstream rollout of central bank digital currencies threatens to diminish the long-term relevance of decentralized cryptocurrencies, reducing transaction volume and value for blockchain infrastructure providers and putting material pressure on MARA's future revenues.
  
• MARA's dependence on Bitcoin price appreciation and the volatility of crypto markets exposes the company to sharp revenue swings and the risk of prolonged periods of net losses, especially as recurring earnings remain largely tied to fluctuating digital asset valuations.
  
• Rapid obsolescence of mining rigs requires heavy, ongoing capital expenditure and may result in cash flow constraints, particularly as hardware cycles accelerate and the need to invest in the latest technology outpaces MARA's ability to generate internally funded replacements.
  
• Accelerating industry consolidation and innovation from larger, better-capitalized competitors threatens to compress MARA's market share and pricing power, exerting downward pressure on both topline growth and long-term profitability.

MARA Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on MARA Holdings compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming MARA Holdings's revenue will grow by 12.3% annually over the next 3 years.
• The bearish analysts are not forecasting that MARA Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate MARA Holdings's profit margin will increase from -46.7% to the average US Software industry of 13.2% in 3 years.
• If MARA Holdings's profit margin were to converge on the industry average, you could expect earnings to reach $132.1 million (and earnings per share of $0.31) by about July 2028, up from $-329.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 40.1x on those 2028 earnings, up from -20.8x today. This future PE is lower than the current PE for the US Software industry at 43.1x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.98%, as per the Simply Wall St company report.

MARA Holdings Future Earnings Per Share Growth

Risks

• MARA Holdings’ substantial investment and progress in vertical integration—including ownership of power generation assets, in-house mining infrastructure, and proprietary advancements like 2-phase immersion cooling—position the company to achieve steadily decreasing operating costs and enhanced capital efficiency, which over time could drive steady improvements in margins and EBITDA.
  
• The company’s focus on securing low-cost, flexible, and renewable energy sources through public-private partnerships and international expansion reduces exposure to grid volatility and energy pricing risk, supporting both revenue stability and a sustainable reduction in cost of goods sold.
  
• MARA Holdings is actively diversifying its revenue stream with the development of digital energy technologies, proprietary hardware and software platforms (like MARA Pool), as well as targeting the AI data center and cooling market; this could add recurring revenues and reduce reliance on the cyclical nature of Bitcoin mining, ultimately supporting more predictable earnings and revenue stability.
  
• The company’s large and ongoing accumulation of Bitcoin (“full HODL approach”), combined with mining at among the lowest energy costs in the sector, exposes shareholders to substantial upside as institutional and government adoption of Bitcoin increases, which has historically corresponded with significant capital inflows and higher Bitcoin prices, benefiting net assets and driving potential fair value gains.
  
• Partnerships with ASIC hardware innovators and compute OEMs, as well as vertical integration through investments in companies like Auradine, provide MARA with unique cost and performance advantages; these initiatives can deliver sustained improvements in gross margin, reduce capital expenditure through technology leadership, and build competitive barriers that bolster long-term revenue and earnings growth.

Valuation

• The assumed bearish price target for MARA Holdings is $9.5, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of MARA Holdings's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $34.0, and the most bearish reporting a price target of just $9.5.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $997.8 million, earnings will come to $132.1 million, and it would be trading on a PE ratio of 40.1x, assuming you use a discount rate of 9.0%.
• Given the current share price of $19.44, the bearish analyst price target of $9.5 is 104.6% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.