This past year was certainly an excellent one for Marathon Digital (NASDAQ:MARA) stock, which surged more than 300% as Bitcoin (BTC-USD) went on an absolute tear. The move was expected because of bearish sentiment and the upcoming Bitcoin halving.
This halving was clearly overly-priced into this stock. However, investors are once again considering the effects on its balance sheet. MARA stock is now down on a year-to-date basis, as uncertainty looms around the company’s future profitability and cash flow profile. I still think those who are bullish on Bitcoin may want to consider MARA.
Recent Earnings Report
Marathon released an impressive Q4 2023 earning report in February. This was a quarter to remember, as the company brought in a remarkable $156.8 million in revenue.
The company also revealed it has mined over 4,242 BTCs in the past year, surpassing its 2022 record production. Efforts persist in enhancing the hash rate and mining capacity, which should further the company’s efforts moving forward (despite the halving event eliminating some of this benefit).
The company has continued to pile its record profit of more than $150 last year into capital improvements and positioning the company to be a leader in this space moving forward.
Many investors may be losing sight of the fact that it’s going to be a race for market share in the crypto mining space. If Marathon Digital is able to offset lost revenue with greater overall share, and Bitcoin’s price rises materially from here, these sorts of record profit numbers have the potential to continue.
That’s a lot of ifs. But it’s true that Marathon Digital’s operations remain strong, and support the company’s current valuation.
ROI On Continued Investment Key to Watch
Last year, Marathon Digital operated roughly 210,000 crypto-mining rigs, generating more than $385 million in revenue as Bitcoin’s price continued to rise.
Of course, Bitcoin’s price movements are going to remain the key focal point of investors and that’s largely outside of the company’s control.
But its recent investments in additional hash rate and mining capacity should allow the company to generate outsized production, partially offsetting the impact of halved rewards and a potential scenario where Bitcoin’s price flat-lines or moves lower.
MARA Stock Looks Fairly Valued
I’d have to say that Marathon’s valuation last year certainly got a little exuberant, to put things nicely. However, that was coming off of a 2022 bear market in crypto where no one wanted to own anything related to this sector. So, things have sort of round-tripped on the valuation front.
It’s my view that Marathon Digital’s current valuation is fair, and I’d consider the stock a buy (for those bullish on Bitcoin) and a hold for everyone else. I have no skin in the game regarding this stock. I just think that the market’s recent negative take on the Bitcoin miner may be overdone.
We’ll have to see if this take is the right one a year from now. But given Bitcoin’s recent dominance, I do think there are plenty of pathways higher for this overlooked crypto stock right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
