It has been an eventful period in the crypto sphere. Elon Musk, China, the IRS, energy consumption, volatility – all the usual suspects have been involved lately as cryptocurrency prices from Bitcoin and beyond crashed.
Regardless of the near-term wild volatility – par for the course in crypto – it is hard to ignore the fact crypto, more than ever before, is here to stay. The crypto space is also expected to keep on providing plenty of opportunities for those well-positioned to benefit.
For B. Riley’s Lucas Pipes, Marathon Digital (MARA) is one such company. Marathon specializes in mining Bitcoin, and its fortunes, like others in the space, are closely correlated to Bitcoin’s performance.
Although Pipes acknowledges “challenges exist” for the space, considering the Bitcoin price volatility, for miners that have the “infrastructure in place and can build scale,” the analyst sees major opportunities.
“We estimate highly attractive ROICs for digital miners that have access to equipment and low-cost electricity,” Pipes said. “MARA plans to have over 100,000 miners in place by YE22, which may bring expansion of its physical presence outside of its core Hardin, MT, facility into play.”
This could become a reality rather sooner than later, as evident from Marathon’s binding LOI with Compute North, announced earlier this week.
The deal stipulates that Compute North’s new Texas 300 MW data center will be home to Marathon’s recently purchased 73,000 miners. The facility should up MARA’s total hash rate to 10.37 EH/s and “maintain competitive mining costs.” The setup should occur in various stages between October 2021 and March 2022.
Although a detailed cost breakdown was not provided by the company, management anticipates total mining costs (electricity, hosting expenditures, and data center management) will now be $0.0453/kWh. What’s more, with Bitcoin mining’s massive energy consumption considered a fatal flaw for environmentally conscious investors, the Texas addition, Marathon claims, will make operations approximately 70% carbon neutral.
“Overall, we believe the announcement is positive for MARA from a cost and strategic perspective,” Pipes said.
Pipes also lists the company’s recent launch of the fully AML (anti-money laundering) and OFAC (Office of Foreign Asset Control) compliant North American mining pool as further enhancing the MARA story.
Well, good for Marathon, but down to the nitty gritty, what are the implications for investors? Pipes initiated coverage on MARA with a Buy rating and $47 price target. The upside potential here comes in at a handsome 88%. (To watch Pipes’ track record, click here)
Only one other analyst has been tracking MARA’s progress, but they have reached the same conclusion – Buy. The stock’s Moderate Buy consensus rating is backed by a $48.50 average price target, which could yield returns of ~95% in the year ahead. (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.