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Proprietary Data Insights Financial Pros’ Top Bitcoin Stock Searches in the Last Month
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Jim Cramer is Right About This Bitcoin Stock |
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People love to follow Jim Cramer’s calls, whether to follow his advice or watch him crash and burn. However, we agree with him about one stock – Marathon Digital (MARA). Many traders use this crypto miner as a proxy for Bitcoin prices. But is it an investible product? Here’s what we think. Marathon Digital’s Business One of the largest publicly traded miners, Marathon Digital operates large Bitcoin mining facilities at 11 facilities across three continents, the majority of which are in the U.S.
Source: Marathon Digital May 2024 Investor Presentation Mining operations turn a profit based on a pretty simple formula: Profit = Mining revenues – infrastructure – personnel – energy Consequently, higher Bitcoin prices help the company, while higher energy prices hurt them. The company uses a combination of off-grid energy from landfill methan as well as other fossil fuels and some renewables.
Source: Marathon Digital May 2024 Investor Presentation Revenues are split into owned mining services (87% of revenues) and hosting services for other miners (13% of revenues). YoY, Marathon’s cost per hash rate per day, basically its mining efficiency, improved from $53.7 to $45.2. Our biggest issue is the indirect exposure to Bitcoin. You can now own Bitcoins rather easily, whether you hold the digital currency itself or an ETF. Miners come with a lot more uncertainty. Financials
Source: Stock Analysis Marathon Digital’s revenues have expanded as the price of Bitcoin has improved. And its margins look good… …but its cash from operations is negative. That number doubled from -$176.5 million in 2022 to -$315.7 million in 2023. We see this as income statement manipulation through non-cash items they use to reduce expenses. Don’t let them fool you. Look, how did the balance sheet go from $103.7 million in cash to $357.3 million while total debt halved from $783.5 million to $326.1 million? The total number of shares outstanding increased from 145.6 million to 242.8 million. If you look at the grid above, you’ll see just how much the company has diluted its stock over the years. Valuation
Source: Seeking Alpha Neither Marathon Digital nor rival miners Riot (RIOT) or Hut 8 (HUT) are cash flow positive. That should tell you something. Any P/E measure is artificially inflated by depreciating assets over time and other accounting tricks. Adjacent companies like Coinbase (COIN) aren’t directly tied to the price of Bitcoin but profit from cryptocurrency transactions in general. Snowflake (SNOW) is simply a company that holds a lot of Bitcoins. Growth
Source: Seeking Alpha Revenue growth isn’t a problem for miners when expanding their mining footprint, and Bitcoin prices rise. Yet, the EPS growth can be deceiving as we noted above. Profitability
Source: Seeking Alpha It’s fascinating that Marathon Digital can have such amazing margins yet burn cash. No wonder their return on assets is negative.
Our Opinion 0/10 We’ve gotten even more bearish on this stock than in the past. The obvious income statement manipulation smacks of serious problems. Traders might love to play options on this company. But as for a real investment, we agree with Jim Cramer, just own Bitcoin instead. |
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