After a Pullback, Marathon Digital (NASDAQ:MARA) Presents a High Risk - High Reward Opportunity

By
Stjepan Kalinic
Published
November 16, 2021
NasdaqCM:MARA
Source: Shutterstock

Few asset classes can match the volatility of cryptocurrencies. Naturally, companies like Marathon Digital Holdings, Inc. ( NASDAQ: MARA ) that operate in that space peg themselves to the volatility.

Interestingly enough, despite the drop of 27% in a single session, this move has undone just two weeks of price movement.

View our latest analysis for Marathon Digital Holdings

Third-quarter 2021 results

The company reported a solid third-quarter result with improved revenues and control over costs, although losses increased.

  • Revenue: US$51.7m (up US$50.9m from 3Q 2020).
  • Net loss: US$22.2m (loss widened US$20.2m from 3Q 2020).

Over the last 3 years, on average, earnings per share have increased by 108% per year, but its share price has risen by 198% per year, which means it is tracking significantly ahead of earnings growth.

SEC on the Move

It is said that bad news often comes in pairs. After the global crypto market dropped over 7% in a day, Marathon Digital disclosed a subpoena from the Securities and Exchange Commission (SEC), inquiring about their data center facility in Hardin, Montana.

One year ago, Marathon made a deal with Beowulf Energy to develop a low energy cost Bitcoin data mining center. While SEC might be simply flexing muscles on the emerging sector, its subpoenas are a proven needle-mover, as the stock experienced the largest single-day drop in recent years.

Profitability on the Horizon

The consensus from 4 American Software analysts is that Marathon Digital Holdings is on the verge of breakeven.They anticipate the company to generate positive profits of US$21m in 2021.The company is therefore projected to break even as soon as one quarter from now.

Working backward from analyst estimates, it turns out that they expect the company to grow 109% year-on-year, on average,which signals high confidence from analysts.

earnings-per-share-growth
NasdaqCM: MARA Earnings Per Share Growth Nov. 16, 2021

Given this is a high-level overview, we won't go into details of Marathon Digital Holdings' upcoming projects but take into accountthat, by and large,a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Additionally, one more aspect is worth mentioning. Marathon Digital Holdings operated with no debt on its balance sheet,which is unusual for a cash-burning growth company. However, this is changing as the company just announced US$500m in senior convertible notes due to Dec. 1, 2026. The company is planning to use the debt offering proceedings to acquire more Bitcoin or Bitcoin mining machines.

Next Steps:

The recent price movement shows that investing in the blockchain sector is not for the faint of heart. On the other hand, this massive pullback offers an opportunity for those optimists who missed the big move.

However, there are too many aspects of Marathon Digital Holdings to cover in one brief article. Still, the key fundamentals for the company can all be found in one place – Marathon Digital Holdings' company page on Simply Wall St . We've also put together a list ofessentialaspectsyou should look at:

  1. Valuation : What is Marathon Digital Holdings worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Marathon Digital Holdings is currently mispriced by the market.
  2. Management Team : An experienced management team at the helm increases our confidence in the business – take a look at who sits on Marathon Digital Holdings's board and the CEO's background .
  3. Other High-Performing Stocks : Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here .

Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.