MARA Holdings (MARA) operates as a Bitcoin (BTC-USD) miner and as such it is a popular option to gain exposure to cryptocurrency without buying digital assets. For the company’s business model to work, MARA requires the price of Bitcoin to be substantially higher than its cost of approximately $56,000 to expand its profit margins.
As such, the rise in the world’s largest cryptocurrency’s value is directly beneficial to the company’s financial performance. When the market price of Bitcoin increases beyond the miners’ production costs, they can sell their Bitcoin holdings at a higher margin, thereby increasing their profitability. Lower interest rates are likely to help risk assets such as Bitcoin. As such, MARA and other Bitcoin miners are likely to see their share prices rise in coming months. For this reason, I am bullish on MARA stock.
Capitalizing on Opportunities
MARA’s portfolio boasts over 250,000 Bitcoin mining machines that are owned and leased, which is one of the reasons I’m bullish on the stock. The firm’s diversification extends beyond Bitcoin mining. It also mines Kaspa, develops cooling technology for data centers, and has an energy harvesting business dedicated to utilizing excess power.
MARA recently announced that it has secured a $200 million line of credit, which is collateralized by a portion of its Bitcoin holdings. The company said that it “may use the funds to capitalize on strategic opportunities and for other general corporate purposes.”
As the chart below indicates, MARA stock is down 25% this year. The company’s share price has been hurt by a halving event that took place this past April, which is when the available supply of Bitcoin, and the rewards for mining it, are reduced by 50%.
More Favorable Business Environment
Another reason to be bullish on MARA is that a rise in Bitcoin’s price could lead to improved earnings. As the company’s break-even point is set around a Bitcoin price of $56,000, any increase above this level could potentially result in a catch-up rally for MARA stock given its underperformance so far this year.
According to analysts at Bernstein, the price of Bitcoin is expected to reach a cycle high of $200,000 by the year 2025. This bullish forecast is based on a model that takes into account factors such as increasing institutional adoption led by new ETFs and lower interest rates.
Bitcoin miners retain the ability to diversify their revenue streams by venturing into the field of artificial intelligence (AI). Investors might find value in the underlying energy assets associated with these companies. Bernstein’s analysis shows that crypto miners are currently trading at a 90% discount compared to traditional data centers when evaluated on a dollar-per-megawatt basis.
Analysts are Bullish on MARA Stock
Analysts are also bullish on MARA stock. MARA Holdings is one of the largest Bitcoin miners in the world with an installed hash rate of 36.9 EH/S. According to analysts, Marathon Digital’s approach to Bitcoin mining has evolved, transitioning from relying on third-party hosting to focusing on owning and operating its own infrastructure.
Many analysts remain bullish on MARA stock. H.C. Wainwright analyst Kevin Dede recently reiterated a Buy rating and $27 price target on the shares. He took note of the company’s recent initiatives to position it “at the forefront of integrating digital asset computing with sustainable energy solutions and advanced technological applications.”
Is MARA Stock a Buy?
MARA stock has a consensus Moderate Buy rating among eight Wall Street analysts. That rating is based on four Buy, three Hold, and one Sell recommendations made in the last three months. The average MARA price target of $20.71 implies 17.80% upside from current levels.
Read more analyst ratings on MARA stock
Conclusion
MARA Holdings is a Bitcoin miner whose profitability depends on Bitcoin’s price exceeding its $56,000 production cost. The company’s operations benefit from rising Bitcoin prices as it boosts margins by selling mined coins. Given my expectations that Bitcoin’s price will rise in the near-term, the company’s stock seems well-positioned to outperform. For this reason, I remain bullish on MARA stock.
