Some stocks have complicated bull cases, but that’s not really the story here with Marathon Digital (NASDAQ:MARA). In a nutshell, a continued Bitcoin (BTC-USD), coupled with the company’s efforts to produce more BTC at greater efficiency, bodes very well for the MARA stock outlook.
I have laid out this bull case for Marathon in past coverage, reiterating it in my last article on this popular crypto mining play. Shares are still risky and speculative, not a slam dunk bull case.
However, if you believe that Bitcoin’s recent run-up is being driven by not just hype, but by more substantive factors, much suggests that the potential upside is well worth the risk.
Let’s take another look at Marathon, including recent developments that underscore how the prospects for the company (and for the stock) keep getting brighter.
Marathon Digital: Bitcoin Boom Backed by Substantive Tailwinds
The key news with Marathon lately has been the continued surge higher in spot Bitcoin prices. With BTC changing hands at around $52,000 per coin, this cryptocurrency’s market cap has climbed back above the $1 trillion mark. Why are BTC prices continuing to thaw out, after an extended crypto winter?
Skeptics may question why prices are trending up. Mostly, because the latest from the Federal Reserve signals that higher for longer, not “rapid pivot,” is the forecast for interest rates.
In theory, higher interest rates strengthen the appeal of the U.S. Dollar. Lowering the appeal of U.S. Dollar alternatives like BTC and physical gold.
However, there are two good reasons a Bitcoin boom has taken shape. First, with the recent launch of Bitcoin exchange-traded funds (or ETFs), billions in new capital is cycling into BTC. This may continue, as institutional and retail investors seek to gain exposure to this alternative asset class.
Second, as analysts at crypto investment firm Greyscale recently argued, the upcoming “halving” event for BTC could continue to propel it to higher prices. Halving presents a challenge to miners, but don’t assume that means bad news for the MARA stock outlook.
How This Miner Stands to Thrive, Not Just Survive, Post-Halving
Although a Bitcoin halving may be a positive to prices, it does come at the cost of BTC mining rewards. Following the next halving event, expected to happen within the next few months, the “incentive” for each block mined will fall by another 50%, from 6.25 BTC, to around 3.12 BTC.
So then, how is this event not at best a wash, and at worst bad news, for the MARA stock outlook? Well aware of the challenge, the company has made big moves to counter it. As noted in a Jan. 4 press release, Marathon has diversified geographically, establishing/acquiring crypto mining operations in countries with lower electricity costs.
This has resulted in an increased mining efficiency (as measured by hash rate). It’s also lead to an increase in the number of BTC mined. Marathon continues to pursue expansion opportunities in other low energy cost locales, including in Africa.
Increased production/efficiency, coupled with the bullish impact of the halving on BTC prices, points to the company not merely surviving, but thriving post-halving.
As mentioned in prior coverage, with mining costs largely fixed, incremental BTC price increases could mean dramatic improvements in Marathon’s profitability.
MARA Stock Outlook: Getting Brighter as Favorable Coin Price Trends Continue
Right now, forecasts call for Marathon’s earnings to come in at around 19 cents per share this year. Forecasts for next year call for earnings of as low as 18 cents per share, and as high as 54 cents per share.
Yet while that’s a wide range, the aforementioned positive factors strongly suggest that Marathon could deliver results at the high end of this range. Perhaps, even produce results that handily beat this range.
If the Bitcoin bull run carries on into 2025, the rewards for Marathon could be even more ample. At least, given how much more low-cost mining capacity that the company is gearing up to bring online.
Although risky, and subject to the whims of the crypto market, if current trends continue, the MARA stock outlook will remain very bright.
MARA stock earns a B rating in Portfolio Grader.
On the date of publication, Louis Navellier did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article had a long position in Bitcoin.