Bitcoin (BTC-USD) has been under pressure recently over concerns related to the debt ceiling impasse and the heightened regulatory crackdown on crypto market. Nonetheless, shares of crypto miner Marathon Digital (NASDAQ:MARA) have rallied 161% year-to-date and outperformed the 60% rise in Bitcoin. Despite the ongoing uncertainties, Wall Street sees further upside in Marathon.
Marathon’s revenue declined 1% year-over-year to $51.1 million in Q1, as a 74% increase in Bitcoin production was more than offset by lower Bitcoin prices in the quarter. Despite lower revenue, the company was able to lower its loss per share to $0.05 compared to $0.12 in the prior-year quarter due to a gain of $17.6 million on the sale of Bitcoin.
Marathon’s hash rate increased 64% to 11.5 Exahashes in Q1 compared to 2022-end, which helped boost Bitcoin production. The company produced 2,195 Bitcoin during the quarter, up 74% year-over-year.
Marathon also continued to improve its financial position during the quarter and reduced its debt by $50 million. The company ended the first quarter with $124.9 million in unrestricted cash and cash equivalents and 11,466 Bitcoin (market value of about $326.5 million).
Overall, the company is confident about reaching its target hash rate of 23 Exahash by mid-2023 and aims to be the most energy-efficient Bitcoin mining company.
However, regulatory concerns could pose a headwind. In the 10-Q filing for the first quarter, Marathon disclosed that in April 2023, it received an additional subpoena from the U.S. Securities and Exchange Commission related to the Hardin, Montana data center facility. The company received the first subpoena in this matter in the third quarter of 2021.
Is Marathon Digital a Good Stock to Buy?
Following the Q1 results, H.C. Wainwright analyst Kevin Dede reiterated a Buy rating on Marathon on May 12. Dede highlighted the uptick in the company’s hash rate and its joint venture with Zero Two to establish the first large-scale immersion Bitcoin mining operations in the Middle East.
Dede also pointed out that Marathon’s 20% ownership in the joint venture could drive as much as $14 million in other income next year.
Wall Street has a Strong Buy consensus rating on Marathon, with three out of four analysts covering the stock having a bullish review. The average price target of $14.75 implies 65.2% upside.
Wall Street sees further upside in Marathon even after the stellar year-to-date rally. Nevertheless, investors must exercise caution and be aware of all the risks, including high volatility and regulatory concerns, associated with Marathon and the overall crypto market before making investment decisions.