Bitcoin has surpassed the $70,000 mark with promises of new highs. As the cryptocurrency value surges, Bitcoin miners like Marathon Digital (MARA) are in a favorable position to see substantial growth. Marathon Digital, a leading digital asset technology company, boasts an impressive Q2 2024 hash rate growth of 78% to 31.5 EH/s. Its aggressive expansion in capacity, coupled with the cryptocurrency’s rise, led to significant revenue growth. Furthermore, Marathon secured a $200 million line of credit, collateralized by some of its Bitcoin holdings.
This liquidity pot provides the company with the capital flexibility for aggressive investments. As Bitcoin continues to rise, Marathon Digital is an attractive option for investors interested in exposure to the sector.
Marathon Expands its Mining Operations
Marathon Digital Holdings is a significant player in digital asset technology, focusing on bitcoin mining. The company has recently issued significant updates on its operations and financial standing, continuing to make strategic moves to bolster its position and ensure its future growth potential.
The company recently provided unaudited BTC production updates for September, revealing a 5% growth in its energized hash rate to 36.9 EH/s, a 6% increase in block wins, and a 5% boost to BTC production (which now sits at 705 BTC). The company remains on track to achieve a 50 EH/s rate by the end of 2024.
Marathon announced that it was securing a $200 million credit line, collateralized by part of its bitcoin holdings. The funds will be allocated toward strategic opportunities and intended for general corporate purposes. Moreover, in August, the company announced the closing of its $300 million offer for 2.125% convertible senior notes due in 2031. The sale of these notes resulted in approximately $292.5 million in net proceeds.
The company used the proceeds to acquire roughly 4,144 Bitcoin for approximately $249 million. The remaining funds are intended for additional Bitcoin procurement, working capital, strategic acquisitions, asset expansion, debt repayment, and other outstanding obligations. The company’s internal structure was significantly revamped, and three strategic business teams were created to align with its focus on growth. The company successfully acquired the Garden City data center, partnered with the Kenyan government, and diversified its portfolio of digital assets through the launch of Kaspa mining operations.
Marathon’s Recent Financial Results
During the second quarter of 2024, the energized hash rate rose dramatically, increasing by 78% to reach 31.5 EH/s. Despite this growth, BTC production dipped by 30% from the previous year. Yet the rising price of the cryptocurrency helped to drive a 78% revenue increase to $145.1 million from $81.8 million in Q2 2023. However, the net loss increased to $199.7 million, a significant rise from $9.0 million in Q2 2023. The losses include a $148.0 million loss on the fair value of digital assets. Adjusted EBITDA also dipped to a loss of $85.1 million, compared to $35.8 million in Q2 2023. The period ended with combined unrestricted cash and cash equivalents and BTC valued at $1.4 billion.
Despite an unexpected dip in BTC production, the company’s hash rate recovery was completed, and an installed hash rate of 31.5 exahash was achieved. The company also shifted its treasury policy, keeping all BTC going forward. By the end of the quarter, the balance sheet showed 18,488 BTC, with an additional purchase of $100 million worth of BTC carried out subsequently.
Is MARA a Buy?
The stock is highly volatile, sporting a beta of 3.39, and has climbed 114% in the past year. It trades near the middle of its 52-week price range of $8.39 – $34.09 and shows positive price momentum as it trades above the 20-day (17.41) and 50-day (17.15) moving averages. Its P/E ratio of 10.9x suggests it is relatively undervalued compared to its peers and the greater Capital Markets industry, where the average P/E ratio sits at 20.9x.
Yet, not everyone is sold on the stock’s upside potential, as MARA has a high short interest of 26.36% and is currently subject to significant market skepticism. However, this also leaves room for the possibility that the share prices could surge due to short squeezes.
Analysts following the company have been cautiously optimistic about MARA stock. Based on the most recent recommendations of eight analysts, Marathon Digital Holdings is rated a Moderate Buy. The average price target for MARA stock is $20.71, representing a potential upside of 8.83% from current levels.
Final Meditation on MARA
Marathon Digital is well-positioned to continue to benefit from Bitcoin’s surge. With an impressive hash rate growth to 31.5 EH/s, Marathon’s aggressive expansion, paired with Bitcoin’s rise, has resulted in significant revenue growth. The company’s strategic investments, backed by a $200 million line of credit, place it in an excellent position for robust growth, making it a compelling option for those looking to invest in the sector.
