Wednesday, 15 May 2024

1 Wall Street Analyst Thinks Marathon Digital Stock Is Going to $27. Is It a Buy?

by BD Banks

One of the stocks that got rocked this earnings season was Marathon Digital (NASDAQ: MARA). The company, which mines Bitcoin, reported its first-quarter earnings. To say these were mixed would be an understatement; while it crushed the consensus analyst estimate for profitability, it whiffed badly on revenue. Investors were more worried about the latter and traded the stock down.

Following this trajectory, one pundit cut his price target on Marathon’s shares. He’s still bullish on the company’s prospects, so should you follow his advice and buy some?

A fine time to mine

Just after that earnings report was made public, H.C. Wainwright’s Kevin Dede made a fairly deep cut to his Marathon fair value estimation. In his view, it’s now worth $27 per share, well down from his previous target of $35. That doesn’t make him a bear, though, as he maintained his buy recommendation.

A frothy market for Bitcoin greatly improved Marathon’s recent fundamentals. Although revenue missed the consensus analyst estimate, it did notch a new quarterly record of over $165 million, and more than tripled from the first quarter 2023 tally. Investors might not have been pleased with the 34% quarter-over-quarter decline in the amount of Bitcoin mined, though. On a brighter note, net income more than doubled to $337 million.

In his analysis, Dede waxed bullish about the recent recovery of a Marathon mining site, which experienced a shutdown but is now back in operation. Given this, he’s expecting solid growth in the company’s May performance when the company reports its monthly figures for that period.

Where Bitcoin goes…

Dede’s price target reduction was due to the fading of this year’s great crypto market catalyst, the launch of spot Bitcoin exchange-traded funds (ETFs) in January.

I think his buy recommendation is justified, as the Bitcoin price is still relatively high despite the recent sell-offs, and the company is now well-positioned to reap the benefits. Miners have always been a sideways play on the trajectory of Bitcoin, so believers in the cryptocurrency might consider buying shares in this digital earth digger, too.

Should you invest $1,000 in Marathon Digital right now?

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Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.