Marathon Digital’s Growth Spurt Comes to an End, Causing Concern for Investors
Marathon Digital (NASDAQ:MARA) has experienced a remarkable surge in its stock price, rising by an impressive 640% over the past 12 months. The company, which was once a small patent holding firm, rebranded itself as a pure-play Bitcoin miner in 2020. Initial doubts, Marathon has become the world’s largest Bitcoin mining company, with a fleet of 184,400 active miners as of December 1st. Its closest competitor, Riot Platforms, operated a fleet of 112,944 active miners at the end of November. Marathon’s bold moves, including opening new plants, launching a joint venture, and acquiring multiple BTC mining sites, have solidified its position as a leader in the market.
Marathon’s primary source of revenue comes from BTC mining, with additional income from selling the BTC it mines. In 2021, the company’s revenue soared to $150 million as it deployed its first miners. In 2022, its revenue declined to $118 million due to BTC’s price decline. Analysts expect Marathon’s revenue to more than triple this year as BTC’s price recovers and the company expands its mining operations. These estimates are closely tied to BTC’s volatile price and should be taken with caution.
Its impressive revenue growth, Marathon is not consistently profitable on a GAAP basis and has taken on a significant amount of debt to expand its mining operations. With an enterprise value of $6.1 billion, the company trades at about 12 times next year’s sales. Its closest competitor, Riot, trades at just 8 times next year’s sales, despite growing at a slower rate. Additionally, the upcoming Bitcoin “halving” event, which cuts mining rewards in half every four years, could pose a challenge for Marathon’s growth. This event is expected to occur in the first half of 2024 and could potentially slow down the company’s revenue growth.
Marathon Digital has established itself as a leader in the Bitcoin mining industry, with a strong track record of growth and expansion.
