Marathon Digital Ramps Up Mining Capacity - Is A Turnaround in the Making?

Zinger Key Points
  • B. Riley Securities downgrades Marathon Digital's target to $18, citing Q1 misses and high operational costs.
  • Marathon Digital adjusts EBITDA projections amidst operational challenges, shares dip 8.55% to $17.97.

B. Riley Securities analyst Lucas Pipes maintained Marathon Digital Holdings Inc MARA with a Neutral and lowered the price target from $19 to $18.

Marathon Digital Holdings reported a first-quarter miss after excluding gains on digital assets and other non-recurring items. 

Adjusted EBITDA, excluding these items, came in at $51.1 million on Pipes’ estimates below his prior estimate of $83.5 million and consensus of $77.1 million. 

The company underperformed on elevated power and operating costs compared to Pipes’ estimates, while revenue was also lower than he had anticipated. 

So long as fully loaded production costs are above BTC prices, Pipes noted that the equity will likely continue to underperform its BTC benchmark, especially when investors have the alternative of holding liquid ETFs. 

He updated his estimates for the second quarter and 2024 adjusted EBITDA from $83.5 million to $68.0 million and from $363.1 million to $758.3 million, respectively.

Needham analyst John Todaro reiterated Marathon Digital Holdings with a Hold.

MARA reported results after the close Thursday, missing on top-line and adjusted EBITDA ex-BTC gains, Todaro said. 

The miss was primarily due to outages at Ellendale, but management estimates that around 60%- 65% of site capacity is currently online. 

He said G&A also increased sequentially, but management expects cash G&A to stay nearly flat for the remainder of fiscal 2024.  

Marathon Digital Holdings reported revenue of $165 million, compared to Needham’s estimates of $175 million. 

The company also reported adjusted EBITDA ex-BTC gains of $40 million, compared to Needham estimates of $66 million.

MARA increased its target from a previous range of 35 EH/s—37 EH/s to 50 EH/s by the end of fiscal 2024 and expects hosting to be gone by the third quarter of fiscal 2024.

The analyst liked the improved costs for the remainder of fiscal 2024 as the company becomes more vertically integrated, with 54% of sites owned and operated by MARA. 

He increased his revenue estimates to reflect the increased hash rate coming online in fiscal 2024, but he also increased total network hash estimates, which partially offset. 

MARA stock gained 76% in the last 12 months. Investors can gain exposure to the stock via Global X Blockchain ETF BKCH and IShares Trust IShares Blockchain And Tech ETF IBLC.

Price Action: MARA shares traded lower by 8.55% at $17.97 at the last check Friday.

Image: Eivind Pedersen from Pixabay

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