Marathon Digital Sell-Off a Buying Opportunity, DA Davidson Analyst Says

The decline of the bitcoin miner’s shares because of the SEC’s subpoena and convertible debt offering is “overdone,” according to the firm.

Nov 16, 2021 at 4:56 p.m. UTC
Updated Nov 16, 2021 at 5:24 p.m. UTC

The 27% drop in bitcoin miner Marathon Digital’s (MARA) shares on Nov. 15 was “overdone” and thus presents a buying opportunity, DA Davidson analyst Christopher Brendler said in a note.

  • On Monday, Marathon disclosed in its 10-Q filing that it received a subpoena from the U.S. Securities and Exchange Commission (SEC) to produce documents and communications concerning its Hardin, Montana, data center facility.
  • The firm also said the SEC is investigating whether the company has been in violation of federal securities law.
  • In addition, the company said it is raising $500 million in convertible senior notes to buy bitcoin and bitcoin miners, a raise that was later upsized to $650 million.
  • A convertible note is a debt instrument that contains an option for the holder to convert the note into a set amount of the company’s shares.
  • DA Davidson’s Brendler said he doesn’t see much risk around the potential securities violation and that the new funds will help the miner continue to grow “its industry leading 1H22 ramp.”
  • “With the stock trading at 9x our updated 2023 adjusted EPS estimate, the risk/reward has improved dramatically in just 24 hours,” Brendler wrote.
  • Brendler reiterated his “buy” rating on the stock and maintained a 12-month price target of $65 per share.
  • Shares of Marathon were up 1.8% in recent trading, while those of the company’s rivals fell in tandem with the day’s drop in bitcoin and ether prices.

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Aoyon Ashraf is crypto mining reporter with more than a decade of experience in covering equity markets