Marathon Digital (MARA), which is one of the world's largest publicly traded bitcoin miners, will kick off the first-quarter earnings season for crypto mining companies this week, with a focus on how the company is going to house more than 70,000 new mining rigs and source capital for growth, according to Wall Street analysts.
The earnings report is slated to be released after the stock market closes on Wednesday. Marathon will also be hosting its first-ever earnings call at 4:30 p.m. ET on that day.
Analysts will be looking for updates on its roughly 70,000 new miners that will need to be housed and deployed. “MARA has taken delivery of ~70k new Bitmain S19s, but delays in finalizing PPAs (power purchase agreements) with Ercot (Electric Reliability Council of Texas) have resulted in ~45 days' delay for Compute North (the hosting provider) to have the facility ready for MARA's miners,” Jefferies analyst Jonathan Petersen wrote in a research note on Monday. “We are interested to hear an update about the status of and timeline for deploying these miners.”
Petersen has a buy rating on Marathon and a 12-month average price target of $36, which was lowered from $51 to reflect the delay in rig deployment and lower bitcoin price estimates for the year. Petersen now expects bitcoin's price to average $49,529 this year, down from his previous estimate of $54,722.
Compass Point Research & Trading echoed the questions around Marathon’s strategy for housing its new miners. “We will also be looking for commentary around where the company expects to house its 78k S19 XP miner coming later this year, as MARA has not indicated where they will be hosted,” analyst Chase White wrote in a research note on Monday.
Chase also has a buy rating on Marathon, and his 12-month average price target is $50, down from his previous estimate of $66. The average price target of the six analysts who cover Marathon is about $51, according to FactSet data. The stock was recently trading at $16.23.
Marathon said on April 4 that it is still on track to meet its hashrate guidance of 23.3 exahash per second (EH/s) by early 2023, despite a 45-day delay in deploying its mining rigs during the first quarter. Hashrate is measure of computing power.
Funding and relocation
Compass Point’s White will also look for a discussion of how Marathon plans to raise funds for future growth. “We will be looking for any commentary around how the company plans to finance its buildout going forward, and specifically what sources of capital might be available,” White wrote. “We expect MARA will likely indicate a willingness to start selling some of its monthly mined BTC to fund a portion of its opex (operating expenses) and capex (capital expenditures).”
For his part, Jefferies’ Petersen is looking for updates on how the company plans to relocate its mining machines away from a site in Hardin, Mont., that is powered by coal, to a site with more renewable energy sources.
“On the earnings call, we hope to learn more about whether MARA intends to use Compute North or is considering other hosting providers to house the Hardin miners and any future orders,” Petersen wrote.
Another topic that could be a point of discussion is recent chatter about mergers and acquisitions among miners. With some speculation swirling around Marathon as a possible target, the company told CoinDesk last month that it's not interested in selling the company now, citing what it considers to be its undervalued stock.
On average, analysts estimate Marathon will post adjusted earnings per share of 23 cents, sales of $51.5 million and earnings before interest, taxes, depreciation and amortization of $38 million, according to FactSet.
Marathon shares have fallen 50% this year, while those of rivals Core Scientific (CORZ) and Riot Blockchain (RIOT) have dropped 44% and 54%, respectively. Bitcoin has fallen 19% so far this year.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.