Marathon Digital (NASDAQ:MARA), a leading Bitcoin (BTC-USD) miner, has continued to struggle of late. Over the past month, MARA stock struggled but there’s hope ahead.
However, zooming out, this digital asset miner soared 279% last year and rose 101% over the past six months, reflecting its mining prowess. So, analyzing this stock is more about time horizon than anything else.
The company mined a remarkable 4,242 Bitcoins in Q4 alone, surpassing prior achievements and posting $157 million in Q4 revenues, exceeding estimates by $11.27 million.
With adjusted EBITDA reaching $420 million for the year and a substantial cache of 15,126 BTC, valued at over $1.09 billion, Marathon Digital has a sound position in the currency market.
Here’s why Marathon Digital has been on a longer-term bullish trend, and why this stock may be a speculative buy right now.
There Are Positive Catalysts to Consider
Marathon sustains its business by leveraging Bitcoin’s circulation and appreciation. Continuously acquiring mining assets expands capacity and Bitcoin production. Shareholders benefit as long as Bitcoin’s trajectory remains positive.
Recent acquisitions bolstered Marathon’s mining capacity, enhancing operational control and reducing costs.
The company’s CFO, Salman Khan, mentioned in December that transferring site ownership allows Generate to focus on greening data centers while reducing Bitcoin production costs for Marathon. This strategy mirrors traditional mining efforts to cut production costs at their mining facilities.
The UK’s move to permit investment exchanges to launch crypto-backed exchange traded notes drove Bitcoin’s surge. These products targeted professional investors.
Recently, Marathon acquired two mining facilities that have 390 megawatts of capacity. This will reduce production costs and expand more operations. CEO Fred Thiel emphasized the strategic importance of this move.
Bitcoin Halving Could Actually Be a Catalyst
Most investor attention of late has been around the negative impacts the upcoming halving will have on Marathon Digital and its competitors.
Indeed, seeing mining rewards cut in half isn’t a good thing and should hit the company’s top- and bottom lines in a big way.
However, there are other positive catalysts investors are watching right now. Bitcoin’s outlook improved as spot Bitcoin ETFs emerged in January, attracting significant capital into SEC-approved funds.
These ETFs quickly amassed 40% of Gold ETFs’ value within two months, making Bitcoin more accessible to large investors. Experts predict Bitcoin ETFs may surpass Gold ETFs in value within two years.
Bitcoin surged to over $73,000, while mining companies like MARA plunged over 40% from their peak this year because of Bitcoin halving. This process, expected in April, halves the daily Bitcoin production from about 900 to 450 coins.
Marathon Digital, with over 230k miners and a hash rate of 24.7 exahash, faces a production drop. Despite adding more miners, it must diversify its business, as only less than 1.4 million Bitcoins remain to be mined.
If Bitcoin prices continue to rise and reach a doubling from here, world-class mining operations like Marathon Digital should be able to wipe away the effects of this halving. That’s the big question facing the stock right now.
MARA Stock Could Be a Speculative Buy
There’s certainly plenty of risk inherent with Marathon Digital’s business model. The recent stock price suggests investors are ignoring its potential impact from the Bitcoin halving.
Thus, it’s my view that MARA stock essentially represents a leveraged bet on where Bitcoin prices will be a few months down the line.
If Bitcoin does indeed double, the company’s forward price-earnings ratio of 22-times will certainly seem cheap. With a remarkable 253% increase in hash rate capacity to 24.7EH/s in 2023, revenue could actually move higher in time, if Bitcoin prices rise as bulls expect.
There’s too much risk with this stock for most investors. But for those with the right time horizon, it could be an intriguing play right now.
On the date of publication, Chris MacDonald 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.