Marathon Digital Holdings (NASDAQ:MARA) shares are trending higher again, for a very obvious reason. Spot Bitcoin (BTC-USD) prices are bouncing back, after several weeks of price declines. What does this mean for the MARA stock forecast?
Some may be skeptical that the Bitcoin rally, and hence the latest MARA rally, is sustainable. However, as I’ve pointed out previously, there’s a bull case to made for this crypto mining stock, even if BTC starts to trade sideways/trends lower again.
Not only that, the bull case for BTC may be getting stronger as well. For those seeking exposure to rising BTC prices, Marathon Digital is not only a worthwhile choice.
It may offer a greater level of potential upside, as crypto mining stocks can often make moves (albeit both higher and lower) outsized compared to that of the underlying cryptocurrency itself, as I’ll explain in further detail below.
MARA is More Than a Bet on Rising BTC
First, let’s take another look at the bull case for Marathon Digital that hinges less on spot BTC prices, and more on factors better within this crypto mining firm’s control. Like I have discussed before, Marathon has been aggressively expanding its Bitcoin mining capacity.
This has, in turn, resulted in a strong increase in production levels. For instance, during the month of January, Marathon produced 1,084 units of BTC. This represents a 58% increase compared to the prior year’s month. Alongside increased production, is something else that is a major positive for the MARA stock forecast.
Among those more bearish on this and other crypto mining stocks, there’s been concern about the impact of the upcoming “halving” event (which will reduce mining rewards) on profitability. However, well aware of this challenge, Marathon has been proactive in its efforts to improve its cost structure.
They can accomplish this by achieving economies of scale through acquisition. A good example is with a recently announced acquisition, which Marathon says could reduce its mining costs by 30%.
Sell-side analysts already anticipate increased production/higher margins to increase profitability by nearly 58%, but the impact could be even greater. Here’s why.
Still, a BTC Bull Market Would is More Than a Cherry on Top
The MARA stock forecast is clearly promising, irrespective of a further Bitcoin bull market. However, if a bull market continues, it could serve as more than just the proverbial cherry on top. It all has to do with the high operating leverage inherent with crypto mining operations.
This is very similar to the operating leverage dynamic at hand with traditional mining stocks, like gold miners, as well as with energy stocks and oil prices. With Marathon’s costs largely fixed, incremental increases in the spot price of BTC could have a dramatic impact on profitability.
Analyst consensus may call for 58% earnings growth for MARA, but the high end of forecasts call for earnings growth of nearly threefold. Although it’s not guaranteed that BTC’s bull run carries on through the rest of 2024, here are reasons it might, in the near and longer-term.
Although investors initially “sold the news” of BTC ETFs getting regulatory approval, capital is rapidly flowing into these ETFs. This has (and could continue) to push up Bitcoin prices in the short-term. Over a longer time-frame, factors like lower interest rates (increasing the appeal of U.S. Dollar alternatives) could fuel a further move higher.
MARA Stock Forecast: Risky, but Potential Rewards Are Massive
Make no mistake. While MARA’s merits as an investment opportunity may be strengthening, this remains a perilous stock. Just as a moderate rise in BTC prices can drive an epic rally for shares, a moderate BTC pullback can result in a heavy sell-off.
As you likely recall, such a heavy sell-off happened last month, when Marathon shares fell by over 50% from recent highs. Yet while risk remains high, so too do the rewards from taking a small, speculative position in this leading cryptocurrency mining firm.
Hence, let me reiterate a bullish MARA stock forecast. If you are confident that Bitcoin is poised to stay on an upward trajectory, throughout this year and beyond, feel free to buy at current prices.
MARA stock earns a B rating in Portfolio Grader.
On the date of publication, Louis Navellier did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article had a long position in Bitcoin.