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Marathon Digital (NASDAQ:MARA) stock has a pessimistic outlook, although the stock has actually underperformed year-over-year. This comes as Bitcoin (BTC USD) is hovering near an all-time high. One might ask why this is so. Finally, the MARA share price is directly linked to the value of Bitcoin.
Investors are considering the upcoming Bitcoin halving and its impact on prices. A 50% drop in revenue is significant for a company like Marathon Digital unless Bitcoin continues to rise. For Bitcoin believers, MARA stock could be a buy.
Strong financials and MARA Stock
In his Last quarter earnings reportMarathon has certainly taken a victory lap given its excellent results.
The company reported net income of more than $150 and revenue of $156 million, with 15,126 Bitcoin on its balance sheet at the end of the year.
These Bitcoins alone are worth well over $1 billion at the time of writing, supporting Marathon Digital’s $6 billion valuation.
However, the other $5 billion of the company’s valuation tied to future cash flows remains uncertain, especially if the upcoming halving will cut those numbers in half.
Marathon Digital announced in its earnings report a plan to increase margins and double its cashback rate by 2025. This strategic plan may require the use of some of the company’s Bitcoin reserves, but would also mean that the company does not have to dilute shareholders or take on debt.
So the question about the future financial position of this company is: where do you see the price of Bitcoin in five years?
Bitcoin mining firmware released
As a large Bitcoin miner, Marathon is introduced MARAFW and MARA UCB 2100advanced firmware and control boards that improve the performance and efficiency of Bitcoin mining rigs.
After a year of development and testing, Marathon is implementing MARAFW on its over 200,000 mining rigs.
After successful initial launches, Marathon is expanding MARAFW and MARA UCB 2100 to the broader Bitcoin mining community. The company has sold these to several corporate customers and is now offering them to all interested miners.
MARAFW, a customized firmware, optimizes Bitcoin miners’ chip settings for greater performance, efficiency and stability.
It features hash rate optimization, auto-tuning, overclocking, underclocking and intelligent thermal protection. MARAFW is compatible with most standard control boards and the MARA UCB 2100 from Marathon.
These improvements are definitely worth noting, and there’s huge innovation happening behind the scenes that the market doesn’t seem to be taking into account at the moment.
This stock appears to be a buy
Marathon Digital’s future path remains unclear. There is a lot of short interest in this stock as there is a lot of uncertainty surrounding the company’s future cash flow generating ability.
However, given the risk assessment, I think MARA stock looks like a buy at current levels for those who believe Bitcoin will continue to surpass $100,000 per token by the end of the year.
In my view, MARA stock might actually be a better way to take advantage of Bitcoin’s potential rise than Bitcoin itself. This is essentially guaranteed by leverage.
Of course it’s a risky bet. But those in the crypto sector are not afraid of risk, especially considering the momentum in the space right now.
At the time of publication, Chris MacDonald did not hold, directly or indirectly, any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publication policies.