Marathon Digital (NASDAQ:MARA) stock has been among the best performing stocks in the last year. During this period, the stock has surged by 8,644%.
After reaching an all-time high of $49.41, the shares fell all the way back to $28. They then again surged to around $39 and subsequently found support at $28.50.
This afternoon, MARA stock has rebounded back to $42.60. One point that seems clear is that the stock has support around $30. Accumulating the shares around $30 to $35 is a good idea.
As a quick overview, Marathon Digital is a cryptocurrency mining company. In the last few quarters, the stock has skyrocketed as the value of cryptocurrencies has surged.
For crypto stocks, the good news is that cryptocurrencies are still in the early adoption stage. The same holds true for blockchain technology. Recently, Citigroup (NYSE:C) stated that Bitcoin (CCC:USD-BTC) is “at the tipping point of mainstream acceptance or a speculative implosion.”
It seems very likely that cryptocurrencies are headed for mainstream acceptance. Cryptocurrency mining companies, including Marathon, stand to benefit as Bitcoin trends higher. At the same time, companies like Marathon Digital are likely to become more diversified in the next few years.
Strong Growth From Bitcoin Mining
One of the key factors behind the surge of MARA stock is the company’s growth. For the third quarter of 2020, it reported that its revenue had jumped 160% year-over-year to $835,000.
I believe that the company’s top-line growth is just starting to accelerate. To put things into perspective, it had 2,060 miners in September 2020.
By next quarter, Marathon expects to deploy 23,560 miners. That would amount to 1,100% growth in its miner total. Marathon’s revenue growth is likely to come in around the same level.
Therefore, Marathon Digital is positioned for strong top-line growth in the current year and in its fiscal 2022. In FY23, 23,560 of the company’s miners will be working for a full year. Given these points, it’s not surprising that MARA stock has remained resilient.
It’s important to mention that in January 2021, the company raised $200 million of capital. As a result, it now has $217.6 million of cash, and the company can finance its expansion with that cash.
Another positive catalyst for MARA stock will be increases in the company’s operating cash flows. For the first nine months of FY2020, Marathon reported cash used in operations of $3.4 million. With the company’s monthly revenue potentially poised to jump eleven-fold, it is well-positioned to deliver positive operating cash flows. Those cash flows, in turn, will enable Marathon to finance further growth.
Bitcoin and Ethereum (CCC-USD-ETH) are among the top blockchain networks. Estimates suggest that global blockchain spending will increase from $2.7 billion in FY19 to $15.9 billion by FY23. Banking and manufacturing are among the top industries expected to accelerate their adoption of blockchain. Given these points, the sector can grow tremendously in the next five years.
The Bottom Line on MARA Stock
It seems very likely that cryptocurrencies are here to stay. Further, considering the limited supply of Bitcoin as compared to fiat money, there is a strong case for the cryptocurrency continuing to trend higher.
Marathon Digital is among the best companies in the crypto space. Given its expansion plans, in the next few years, its revenue and earnings growth should be strong. In addition, Marathon owns Bitcoin and, as the crypto’s price trends higher, the momentum of Marathon’s shares will also remain positive.
I therefore don’t expect a meaningful correction in MARA stock. Any decline of the stock below $35 would represent an attractive, long-term buying opportunity.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored more than 1,500 stock-specific articles with a focus on the technology, energy and commodities sector.
