Marathon Digital Stock Might Be in a Bubble, Investors Should Wait

Mohit Oberoi, CFA - Author

Apr. 8 2021, Updated 12:15 p.m. ET

Since bitcoin prices have surged this year, all of the stocks in the blockchain and cryptocurrency ecosystem have skyrocketed. Marathon Digital (MARA) stock has gained 343 percent YTD and is up a whopping 9,152 percent over the last year. However, the stock is now down almost 20 percent from its 52-week highs. Is MARA stock a good buy now?

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Marathon Digital stock lost 11.8 percent on April 7 but opened higher on April 8. Riot Blockchain (RIOT) stock was also trading higher in early trading.

Marathon Digital stock news

On April 5, Marathon Digital released its first-quarter update. It produced 102.3 bitcoins in March, which took its first-quarter total to 196. The company holds 5,134.2 bitcoins, which includes the 4,812.66 bitcoins that it purchased in January. The company purchased the bitcoins at an average price of $31,168 and is sitting on massive gains on its investment. 

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marathon digital holding mara stock price
Source: TIKR

MARA stock has surged

Marathon Digital had cash of $212 million at the end of the first quarter, which doesn't include bitcoins. After accounting for bitcoins, its cash and cash equivalents were almost $514 million at the end of March.

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In the first quarter of 2020, Tesla also announced a $1.5 billion investment in bitcoins. Later, Tesla said that it would start accepting bitcoins from buyers who purchase its electric cars. The company also said that it won’t monetize the bitcoins. 

MARA stock forecast

Only one analyst is covering Marathon Digital stock. The analyst has a buy rating and a $50 target price on the stock. The target price is a premium of 8 percent over the stock’s closing prices on April 7.

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Marathon Digital stock on Reddit

Reddit group WallStreetBets was instrumental in pumping several stocks like AMC Entertainment, Tilray, and GameStop. Academy Sports and Outdoors (ASO) could be the next stock on WallStreetBets’ radar. The community has built its reputation by triggering short squeezes in many stocks.

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Meanwhile, Marathon Digital isn't a popular name on Reddit groups including WallStreetBets. There's a subreddit specifically for MARA stock but it has less than 900 members. A comment on the group asked if MARA stock is a buy. The people who commented were optimistic about the stock.

Should I buy Marathon Digital stock?

Marathon Digital stock looks like it's in a bubble. I hold the same views even though there's increasing optimism about the adoption and use of bitcoins and other cryptocurrencies. MARA stock trades at an NTM EV-to-revenue multiple of 15.5x, which looks on the higher side.

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MARA stock has a high correlation with bitcoin prices. While bitcoin prices have spiked this year, any fall in the cryptocurrency could trigger a fall in MARA stock. Overall, I wouldn't buy MARA stock at the current prices.

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Crypto miners to invest in like Marathon Digital

There are several crypto miners like Marathon Digital. Riot Blockchain is among the leading crypto miners in North America. If you are looking at small bitcoin mining companies, you can look at Canada-based Hive Blockchain Technologies (HVBTF), which trades on the OTC exchange. Hut 8 Mining Corp. (HUTMF) is also a Canada-based bitcoin mining company.

SOS Limited is another bitcoin mining company. Canaan is a play on bitcoin miners since the company supplies equipment for bitcoin mining. Good Works Acquisition (GWAC), which has announced a merger with bitcoin miner Cipher Mining is an additional bitcoin mining stock that you can look at.


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