It’s been a volatile month for Marathon Digital (MARA), to say the least. After rising ~37% in the first two weeks of November, the stock has given back all those gains and more. While the bitcoin miner’s fortunes closely mirror those of BTC, for once, most of the losses cannot be attributed to the leading crypto’s recent stumble.
Most of the share losses occurred on Monday when the stock shed 27% of its value in a reaction to not one, but two developments.
First off, to help with the acquisition of more bitcoin miners, the company announced an upsized $650 million convertible senior notes offering, for which investors seemed to have baulked at the offerings’ sheer size.
However, B. Riley's Lucas Pipes is not overly concerned.
“For Marathon specifically, the offering substantially de-risks the capital requirements for the buildout to 13.3 EH/s over the course of the next nine months,” the 5-star analyst said. “We estimate capital needs of less than $500M, an amount the company comfortably surpasses with its cash on hand, revolver capacity, and now the proceeds from the upsized convertible bond offering.”
While the analyst feels this development might have “added some initial selling pressure on the stock,” Pipes is more perplexed by what seemed to be the other reason accelerating the decline.
The company disclosed that it had been subpoenaed by the SEC for info regarding the build of its data center in Hardin, Montana. Specifically, the investigation relates to Marathon's distribution of six million shares of restricted common stock to finance the development. Pipes thinks the “sharp correction” which wiped off roughly $2.1 billion in market value is “starkly out of context for an information subpoena relating to transactions when the company was at a different stage of its life cycle.” At the time of the related event, Marathon boasted a market cap of just $200 million.
Whether the connection between size of market cap and the violation of security laws is valid or not, the analyst thinks the market “may have overreacted to the disclosure," and he "would take advantage of the weakness in the shares.”
As such, Pipes maintains his Buy rating on MARA shares along with a $92 price target. Investors could be sitting on gains of ~87%, should Pipes' forecast play out as anticipated. (To watch Pipes’ track record, click here)
2 other recent analyst reviews have reached the same conclusion – Buy – all naturally coalescing to a Strong Buy consensus rating. Going by the $68.33 average target, the shares will be changing hands for ~38% premium a year from now. (See MARA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.