Many heavily-shorted cryptocurrency stocks rallied on Wednesday, recording sizable climbs in the double digits. However, it might still be too early to invest in the space, and some crypto stocks are more attractive than others. In this piece, we compared two bitcoin mining stocks to see which is better. Marathon Digital Holdings (NASDAQ:MARA) rose about 24% yesterday, while Riot Blockchain (NASDAQ:RIOT), which announced a name change to Riot Platforms, popped 15%. However, bitcoin (BTC-USD) prices barely moved at all, and the lack of any major news to drive bitcoin-mining stocks demonstrates why investors might hesitate before buying any of them. Nonetheless, it looks like RIOT is the better pick right now.
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Marathon Digital Holdings (MARA)
Marathon Digital is up 14% year-to-date after its 24% surge yesterday as a sudden, dramatic increase in risk-on sentiment benefited many heavily-shorted crypto stocks. However, a closer look suggests a bearish view might be appropriate.
Investors’ remorse quickly set in today as the market started unwinding the surge that poured into crypto stocks the day before, dragging Marathon Digital down over 7%. The lack of any company-specific news demonstrates the danger of investing in stocks like Marathon Digital.
While neither Marathon nor Riot is profitable, Marathon appears to have more problems. The company reported $150.5 million in revenue for 2021 and $150 million for the last 12 months. While its net losses shrunk from 2017 to 2019, its net losses have been growing since 2020 and have ballooned to $268.5 million for the last 12 months.
Marathon Digital has a debt/equity ratio of 106.6%, and it had $1.5 billion in assets and $850.7 million in total liabilities as of its most recent report. The company also had $492.3 million in cash and short-term investments at the end of 2021, but that fell to $55.3 million for the last 12 months.
One thing that makes Marathon Digital different from other bitcoin miners is its asset-light model. However, one big problem that it’s facing is the bankruptcy filing of one of its largest hosting partners, adding to MARA stock’s risk.
After producing 4,144 bitcoins in 2022 and recording a new quarterly production record, the company has 12,232 BTC on its balance sheet.
It should also be noted that about 42% of Marathon Digital’s shares are sold short, so the company could face a short squeeze if the positive momentum continues.
What is the Price Target for MARA Stock?
Marathon Digital has a Moderate Buy consensus rating based on two Buys, one Hold rating, and zero Sell ratings assigned over the last three months. At $16.33, the average price target for Marathon Digital Holdings implies upside potential of 317.65%.
Riot Blockchain (RIOT)
Riot Blockchain is clearly in a better position than Marathon. For one thing, Riot spent only $11,020 to mine each coin during the third quarter, for a gross margin of 61%, compared to Marathon’s $33,691 per coin and 36% gross margin. Riot is extremely risky, but to highlight its superiority to Marathon, a neutral view is taken.
Riot recorded a net loss of $373.2 million for the last 12 months, but its debt/equity position is far better than MARA’s at 1.7%. The company had $257.1 million in cash and short-term investments, $1.45 billion in total assets, and only $154.3 million in total liabilities as of its most recent report.
Riot didn’t issue any new debt over the last 12 months, while Marathon issued $855.6 million and repaid only $77.5 million. Additionally, Marathon’s free cash flow is nearly twice as negative as Riot’s, at -$1 billion versus Riot’s -$591 million.
About 19% of Riot Blockchain’s shares are sold short, so a short squeeze could be possible there too.
What is the Price Target for RIOT Stock?
Riot Blockchain has a Moderate Buy consensus rating based on eight Buys, zero Holds, and zero Sells assigned over the last three months. At $10.79, the average price target for Riot Blockchain implies upside potential of 155.69%.
Conclusion: Bearish on MARA, Neutral on RIOT
Unfortunately, this isn’t the greatest time to invest in bitcoin miners due to soaring energy prices and plummeting bitcoin prices. However, due to its significantly lower debt, much lower price per coin mined, and overall better stability, Riot is more likely to survive the crypto winter than Marathon.
As a result, Riot earns a neutral rating versus Marathon’s bearish view.
