Why Selling Post-Earnings MARA Stock Now Could Be a Major Financial Fumble


  • Marathon Digital’s (MARA) latest earnings release has resulted in a nearly 9% price decline for shares.
  • Yet while fair-weather fans of the stock bailed after earnings, I don’t suggest following their lead.
  • Rather, with two key catalysts still in motion, MARA stock could soon be back on an upward trajectory.
MARA stock - Why Selling Post-Earnings MARA Stock Now Could Be a Major Financial Fumble

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Following its latest upsurge in price because of rising Bitcoin (BTC-USD) prices, many investors have bailed on Marathon Digital Holdings (NASDAQ:MARA). Blame it on the crypto miner’s latest earnings release, which so far has resulted in a nearly 9% price decline for MARA stock.

Marathon’s recent decline was due to company-specific news, but I don’t agree with the bearish conclusion others are drawing. Although shares have sold off post-earnings, a closer look suggests otherwise. With this in mind, read on, as I explain why the Marathon Digital bull case remains intact.

MARA Stock, Earnings, and the Market’s Selling of the News

Post-market on Feb. 28, Marathon Digital Holdings released results for the quarter and full year ending Dec. 31, 2023. For both the quarter and the full-year, Marathon reported materially stronger levels of revenue and earnings. For instance, during Q4, revenue came in at $156.8 million, up 452% compared to the prior year’s quarter.

As for Q4 earnings, these came in at $151.8 million, or 66 cents per share. This represented a massive improvement from Q4 2022, when Marathon reported a net loss of $391.6 million ($3.13 per share). For all of 2023, revenue increased by 229%, to $388 million.

Full-year earnings came in at $261.2 million, or $1.06 per share, a tremendous swing compared to the $694 million ($6.12 per share) net loss reported in 2022. Having said all of this, you now may be really wondering why MARA stock tanked rather than surged on these results.

Although some publications (like Seeking Alpha) have cited the fact Marathon fell short on adjusted earnings, I would say that “selling on the news” is the more likely root cause of this market reaction. Again though, based upon guidance, this profit-taking may prove shortsighted.

Two Strong Catalysts Still in Motion

Short-term speculators and long-term investors alike may have decided to sell into strength with MARA stock post-earnings, but clearly these now-former shareholders have failed to grasp what was arguably the most promising takeaway from the overall release.

That would be Marathon Digital’s updates to guidance. Namely, management’s remarks regarding increases to the company’s overall hashrate (aka Bitcoin production capacity) during this year and the next.

Per this outlook, Marathon’s hash rate could climb to between 35 and 37 exahash, or an up to 49.8% increase compared to 2022. By 2025, the company-wide hash rate could hit 50 exahash. In other words, double 2023 levels.

Yes, after the upcoming Bitcoin halving event, it’s going to take a much higher hash rate to “mine” the same level of Bitcoins. However, the halving is not a headwind, but another powerful catalyst for shares

The forthcoming halving, plus other developments, have resulted in a big jump in BTC prices. This has countered the impact halving will have on production. Also, as I’ve pointed out before, Marathon has been shifting production to lower-cost jurisdictions. Producing more BTC at a lower-fixed cost, the likely impact on future profitability is tremendous to say the least.

The Verdict: Don’t Bail, Back Up the Truck Instead

While I reiterate that Marathon Digital is a high-risk stock subject to greater volatility than most equities, if you’ve been looking to increase your exposure to Bitcoin, consider MARA’s post-earnings sell-off as your invitation to buy.

Even if the sell-off continues, whether because of more profit-taking, or because of another short-term cooldown in excitement over Bitcoin, diving into Marathon on weakness may in time prove to be a very profitable move. Subsequent quarterly results could bring back many of those skittish investors selling the stock today.

Operating in a business with a high level of operating leverage, it may take just moderately-high incremental increases in the underlying price of BTC to drive another big jump in the company’s bottom line.

While the crowd may be bailing, don’t follow their lead. Back up the truck with MARA stock instead.

MARA stock earns an A 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.

Article printed from InvestorPlace Media, https://investorplace.com/market360/2024/03/why-selling-post-earnings-mara-stock-now-could-be-a-major-financial-fumble/.

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