Summary Marathon Digital Holdings is expected to report Q4 earnings on Feb. 28, a potential pivotal moment for the company. Key areas of focus for the upcoming earnings report include hash rate growth, cost per coin mined, financial health, and future growth plans. Potential risks include volatility in Bitcoin prices, execution challenges in expanding mining operations, and regulatory changes in the cryptocurrency industry. Investment Thesis In this article, I will share my bullish outlook on Marathon Digital Holdings, Inc. ( MARA ). I am optimistic as we approach the Q4 earnings report due to the company's strategic advancements in operational efficiency and mining capacity. Specifically, I am focused on their hash rate growth, cost efficiencies, and innovative energy solutions. If they beat earnings and more importantly have an optimistic outlook, the stock price could push higher. But, in this analysis, I remain balanced by considering potential risks in cryptocurrency mining. However, Marathon's moves have been noted (which I go in detail) and I believe they have built a strong foundation. This article will convey why Marathon Digital, to me, stands out as a buy. And the pivotal earnings report is what I primarily focus on. Marathon Digital Rating: Buy Introduction Marathon Digital is a company that mainly mines Bitcoin along with some other cryptocurrencies. How do they do this? The company uses powerful computers to validate transactions on the blockchain. In turn, coin is rewarded. The digital currency's infrastructure is assisted in this process, and Marathon Digital's revenue increases through these digital assets. As for Marathon specifically, they are known for expanding mining operations to improve efficiency. Q4 Earnings Preview On February 28th, Marathon Digital will report their Q4 earnings, where the buzz seems fairly optimistic. On average, analysts are predicting an earnings per share ((EPS)) of $0.05. This was sourced from Zacks Investment Research. Previously, 1 year ago, they reported a loss of $-0.14 per share, which notes a 135.71% difference-- a major move by the company. Below, I have attached the past four quarters of EPS estimations and actuals, which can better represent the situation visually. MARA Quarterly EPS (Nasdaq) As we can see, this trend upward is interesting. Also, their latest estimate called for revenue of $138.04 million, which would point at a 385.71% increase YoY. The anticipation around this report is high, and I think it is a pivotal moment. Investors are keen to see if Marathon Digital can turn the tide from last year's losses. It seems as though the spotlight is on how well the company has managed its operations. This will illustrate if the company can sustain or improve its financial health. The upcoming earnings call is big; it will showcase a recovery and an impactful positive trajectory. What Am I Paying Close Attention To? In anticipation of the upcoming Q4 earnings report for Marathon Digital Holdings, I'm focusing on several key areas. What I am looking at for the upcoming earnings call is the outlook from the November Q3 earnings call . Did they come up short, meet, or exceed their expectations? Firstly, I will be looking at their hash rate growth and uptime improvements. Marathon has made pretty solid strides in expanding their mining capacity to 23 exahash rate. They also have successfully deployed their first international facility in Abu Dhabi. It was designed and built within a very short timeframe and illustrates the company's ability to expand effectively. Another area I will be looking into is their cost per coin mined. Marathon had previously reported a reduction in cost per Bitcoin mined: 9% sequentially. I view this reduction as an illustration to effectively maximize mining operations efficiency across their business sites. However, there was a 9% increase in average network difficulty, but I'd say that increasing cost per Bitcoin mined while struggling in terms of their network is impressive. Additionally, I would advise investors to check their financial health. In specific, I'd hone in on more knowledge of the restructuring of convertible debt. I see it as a strength in the balance sheet, since it was a move by the management team ahead of the Bitcoin halving event next year. So in the Q4 earnings report, I would want to see similar data to reaffirm their long-term viability in a financial sense. Impactful and wise moves, such as this one, illustrates a team that is on their toes. Lastly, I'm interested in their future growth plans and how they intend to further leverage technological advancements. What caught my eye, and I hope they touch on this more, is Marathon's proprietary firmware and cooling technology. If we can hear more insights on this, we are observing a company that is simply maintaining a competitive edge. I love "future-proof" companies, or at least one who thinks forwardly. Also, Marathon mentioned exploring innovative projects that aim for low to zero-cost energy. I personally think this would be a huge catalyst that could propel the stock higher. This news alone would be major. For context, they discussed leveraging the stranded energy and then monetizing the heat off-take from their mining. More discussion in this area would be great and if they have already acted on it, even better. Risks Even though I am bullish on Marathon heading into the earnings report, I would like to be balanced and acknowledge the potential negative catalysts. To begin with, there is always the basic concern of the volatility when discussing Bitcoin prices. This directly affects the profitability of Marathon's mining operations. Furthermore, the company's ambitious growth targets come with execution risks. Expanding hash rates and launching new international facilities will be an operational and expansion challenge for Marathon. Another potential risk involves the competitive and fast-paced landscape of cryptocurrency mining. Resources could be strained when taking leap to stay ahead, both technologically and operationally. It requires continuous investment and innovation, which could be a downfall in the long-term horizon. Additionally, regulatory changes are possible, which could cause shifts in policy towards cryptocurrency. This would impact Marathon's operations and forward direction. However, like I said, I think Marathon is forward-thinking and always on their toes. To me, I believe they are a company that can pivot. However, relying on external partners for hosting and energy supplies is another risk. It shows dependency that affect cost structures and uptime. On the contrary, Marathon has proactively managed debt, strategically invested in tech, and diversified its operations globally. They are positioned well for market fluctuations and competitive pressures. Despite the potential risks, Marathon has measures in place, which reinforces my recommendation of a buy. They have a strong balance sheet, a clear vision for growth, and a team that is constantly looking ahead. Valuation Marathon Digital has had major growth as we take a glance back. The stock is up +46.21% in a 1-month timeframe and up +273.65% over the past year. I think there is benefit in viewing a point and figure chart, which I have added below. This is a traditional three box reversal method to understand support and resistance levels and trend lines. As we take a look at the graph, we can view a major uptick recently. This blue upward trend line is showing the surge as of the beginning of the year. What sticks out to me is the momentum in the stock. I strongly believe in momentum and other alike investors will appreciate this chart. We understand the principle that a stock will not stop until there is a piece of information that turns the tide. Additionally, if we direct our attention to the 3 highest X's on the graph, we can understand that a pattern is being sensed. Marathon is continuing to press up against the resistance level of 30.00/31.00 in the top right portion of the graph. If the price continues to ascend, the stock will likely headline a triple top breakout on this point and figure chart. And as investors, we want to enter the stock before that happens. In other words, the stock is continuing to test 30.00/31.00 and once an X is printed on 32.00, we would have broken the line and entered a "new trading level"; the upcoming earnings call could do just that. MARA Point & Figure (Stock Charts) Because of the nearing earnings report, I believe there is an opportunity for an investment. It could be the sole catalyst that brings the stock price to new highs. There has been much attention on crypto, and I see a surge upward if the catalysts I explained above are met/exceeded. We know this is an industry that reacts fast and drastically. Lastly, I would like to mention that in January of 2024 , Marathon saw a notable uptick in bitcoin mining. 1,084 bitcoins were mined, which reflected a 58% increase. But from December, there was a 42% drop in the company's Bitcoin production number. In the report, it was stated the fluctuation was partly due to challenges concerning weather issues and equipment failures. However, the company managed to enhance its hash rate during this time by 7% to 26.4 exahash. This execution underlines Marathon's resilience and strategic efforts to optimize operations amid the unpredictable crypto mining landscape. Conclusion My bullish outlook on Marathon Digital is grounded in their strategic strides towards operational efficiency and innovation. Despite the risks I presented regarding cryptocurrency's volatility, Marathon's proactive measures and expansion efforts illustrate a positive future. I'm optimistic this Q4 earnings report will be a major catalyst for the company. Ultimately, this article has depicted why I believe Marathon stands as a buy in my book. Please share your insights and questions in the comment section. I will respond promptly!
