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MARA Surges, but Should Investors Run?

Stock Markets Sep 09, 2021 12:31PM ET
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© Reuters. MARA Surges, but Should Investors Run?

In the world of cryptocurrency mining, Marathon Digital Holding’s (MARA) remains one of the top players. In this domain, Marathon is one of the dominant forces crypto investors look to, in order to gain exposure to rising cryptocurrency prices.

There are a number of reasons why various investors have grown increasingly bullish on Marathon's potential. One of the recent catalysts for MARA stock has been an announcement that the company has extended collaboration with NYDIG. Consequently, MARA’s bitcoin mining pool ‘MaraPool’ members will get complete access to the institutional-grade services of this top-grade firm. 

MaraPool is a bitcoin mining pool that focuses on carbon-free mining to reduce the adverse environmental effects of bitcoin mining. Additionally, the pool is audited by a third-party U.S.-based firm and dispenses best-in-class transparency.

With this collaboration, members of MaraPool will gain from seamless access to NYDIG’s services and products. These will include financing, equipment procurement, advisory services, and much more.

Subsequently, the crypto mining giant’s stock price has increased dramatically. Higher bitcoin prices and enthusiasm about an eco-friendly approach to crypto mining seem to have made MARA stock the choice among crypto enthusiasts. This writer is neutral on the stock.

Let’s find out more about MARA stocks and whether it is a good buy or not. (See Marathon Digital Holdings stock charts on TipRanks)

The Amplifying Power of Marathon Digital

According to Marathon's August mining update, Marathon successfully produced 469.6 bitcoins during the month of August. This added to the company's total bitcoin holdings, amounting to an aggregate holding of 6,695 bitcoins as of August. This massive amount of bitcoin comes with a fair market value of approximately $316 million.

Further, its cash on hand grew to $70.9 million, whereas cash and bitcoin holdings reached an estimated $387.3 million.

Marathon also acquired 30,000 S19j Pro miners from Bitmain. This purchase is said to increase MARA’s bitcoin production in the long run. 

At the same time, competitor Riot Blockchain (NASDAQ:RIOT) reported production of 491 bitcoins in the first quarter. However, RIOT is one of the leading mining companies and also one of the most profitable ones. Its gross margin is 67.6%, whereas MARA witnessed a negative profit margin worth -498.9% during Quarter 1. 

In the long run, Marathon Digital focuses on increasing machine installations. It expects delivery of 75,000 miners by this year's end. Moreover, MARA anticipates a total of 103,120 miners by 2022 Quarter 1. With this huge mining capacity, it looks forward to producing 55 to 60 bitcoins in a day. This has the potential to improve the company's margins over the longer-term.

MARA Stock is Finally Soaring

Since early April, MARA Stock hasn't done much. Indeed, this stock was on a relatively bearish trend through the summer. Investors in this crypto mining play seem to have become dissuaded by the relative inactivity in the crypto space during these months.

However, the most recent surge in crypto prices has brought about a new wave of enthusiasm in the sector. Accordingly, MARA stock has rebounded nicely.

The company's stock price has also benefited from the fact that BlackRock (NYSE:BLK) acquired a 6.7% stake in MARA in June. BlackRock’s iShares Russell 2000 is the foremost holder of MARA, consisting of 2.14 million shares. BlackRock joined Fidelity as key institutional holders of MARA stock, providing retail investors with further credence in this crypto play.

Shares of MARA stock are significantly affected by bitcoin prices. Accordingly, with bitcoin prices fluctuating, so too has Marathon's share price. With most of the volatility to the upside of late, Marathon stock has soared from around $10 per share to start the year to around $37 at the time of writing. Thus, this stock has been nearly a 4-bagger on a year-to-date basis, well exceeding the return of the market this year.

What do Analysts Have to Say about MARA stock?

According to TipRanks analysts rating consensus, MARA stock is a Strong Buy. Out of 3 ratings, there are 3 Buy recommendations.

The average MARA price target is $48, implying an upside of 28.7%. The stock price targets range between a low of $40 per share and a high of $54 per share.

Bottom Line

The volatile nature of MARA stock, mostly due to its ties to bitcoin prices, makes this stock a risky investment. However, investors must keep an eye on this stock, as MARA has gathered powerful weaponry of computing power.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

MARA Surges, but Should Investors Run?

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Cristian Moldoveanu
Cristian Moldoveanu Oct 21, 2021 4:09PM ET
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Mara, Riot or Clsk?
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