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Marathon Digital Stock Takes Huge Impairment Charge; Misses Earnings Estimate

Story Highlights

Marathon Digital misses earnings expectations as production increase can’t offset falling bitcoin price.

Marathon Digital (MARA) recently reported earnings for its second quarter of Fiscal Year 2022. Earnings per share came in at -$1.75, which significantly missed analysts’ consensus estimate of -$0.07. In the past seven quarters, Marathon Digital has beat estimates only one time. The significant loss can be attributed to the fall of bitcoin’s (BTC-USD) price, which led to a $127.6 million impairment charge, along with expenses related to the company’s exit from the Hardin, MT facility.

In addition, sales decreased 15% year-over-year, with revenue hitting $24.9 million compared to $29.3 million. The revenue decrease was primarily driven by lower revenue per bitcoin mined, which was partially offset by higher bitcoin production.

Indeed, the company was able to increase production by 8% year-over-year. This equates to 707 bitcoin compared to 655 in Q2 2021. However, production was 44% lower than the 1,259 bitcoin that were produced in Q1 2022. The company cited “prolonged energization delays in Texas as well as maintenance and weather-related issues that impacted the power generating facility in Montana” as reasons for the decline.

Investor Sentiment for Marathon Digital is Negative

The sentiment among TipRanks investors is currently negative. Out of the 551,950 portfolios tracked by TipRanks, 1.6% hold MARA. In addition, the average portfolio weighting allocated towards MARA among those who do have a position is 4.55%. This suggests that investors of the company are quite confident about its future.

However, in the last 30 days, 0.6% of those holding the stock decreased their positions. As a result, the stock’s sentiment is below the sector average, as demonstrated in the following image:

Is MARA Stock a Good Buy Right Now?

Turning to Wall Street, MARA has a Moderate Buy consensus rating based on four Buys and two Holds assigned in the past three months. The average MARA price target of $15.83 implies 9.7% upside potential.

Takeaway – MARA Investors Might be Better Off Buying Bitcoin Instead

Marathon Digital saw huge losses in the quarter, as the falling price of bitcoin led to a large impairment charge. Given that the company’s profitability depends on the price of bitcoin, investors may be better off investing directly in bitcoin. The reason is that the company burns a lot of cash, meaning that there is dilution and bankruptcy risk. However, if you invest directly in bitcoin, you’ll be removing these company-specific risks.

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