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Shares in Marathon Digital (NASDAQ:MARA) are on the move again. A penny stock through half of 2020, MARA posted over 400% growth at the start of 2021 before shedding more than half its value by mid-May. Along the way, trading in MARA stock was even halted by the U.S. Securities and Exchange Commission (SEC).
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And did I mention that this name’s primary business is mining Bitcoin (CCC:BTC-USD)? Those are two strikes for many investors. Plus, if you want a third, how about the fact that Marathon Digital is the parent company of notorious patent troll Uniloc?
That said, despite elements that may make investors turn up their noses, you can’t overlook Marathon’s success. After a meme-stock rollercoaster ride as well as drama in the crypto world, MARA stock is up 264% year-to-date (YTD). So, here’s a look at the good and the bad with this pick.
MARA Stock and Q2 Earnings
First, if we really want to evaluate MARA stock, we should look at its latest earnings report. Back in mid-August, Marathon Digital reported second-quarter earnings. The results were relatively solid.
For one, adjusted earnings per share (EPS) came in nicely at 21 cents. Meanwhile, revenue of $29.3 million was less than expected. However, despite that miss, the company’s quarterly revenue was still a 220% increase from what it reported in Q1. Additionally, revenue was up a whopping 10,147% from the prior-year period.
Finally, as of June, this company’s cash and Bitcoin holdings totaled $366.5 million. On Jun. 28, MARA stock was also added to the Russell 2000 Index.
Boosting the Rig Count and Drawing Attention
The other thing to pay close attention to when it comes to MARA stock is Bitcoin.
Although Bitcoin prices plunged earlier in the summer, they’ve been improving since mid-July. At the same time, the Chinese government has clamped down on Bitcoin mining. Now, Marathon Digital is taking full advantage of these circumstances.
More specifically, the company is spending big on Bitcoin miners, which have fallen in price as Chinese crypto miners unload their rigs. On Aug. 2, MARA announced it would spend $120.7 million to buy an additional 30,000 high-performance mining machines.
These Antminer S19j Pro mining rigs have a high hash rate, which means the company is able to mine Bitcoin at a higher rate. The company notes the following:
“[O]nce all miners are fully deployed, our mining operations will be among the largest, not just in North America, but globally.”
That said, while Marathon Digital has had considerable success on the Bitcoin front in 2021, the story is a little more complicated. As a meme stock, the price of MARA stock has tested the nerves of investors. And while it hasn’t come close to the penny-stock status it held through the first half of 2020, there have been big, rapid movements in the price — both up and down.
No doubt, the meme status is a bit of a red flag. In fact, the situation was severe enough that, back in February, the SEC temporarily suspended trading in MARA stock shares.
Bottom Line on MARA Stock
MARA stock currently earns a “B” rating in my Portfolio Grader. The company doesn’t get wide analyst coverage, but three investment analysts tracked by the Wall Street Journal all rate the stock as a “buy.” Their average 12-month price target of $50.67 offers a 33% upside from today’s price. That takes some of the worry out of buying the stock.
Ultimately, whether an investment in MARA stock makes sense for your portfolio boils down to two questions. Are you comfortable with investing in a meme stock — one that was a penny stock little more than a year ago? And second, how do you feel about cryptocurrency, specifically Bitcoin?
If either of these factors make you nervous, then Marathon Digital probably isn’t for you. But if you’re fine on both counts? The potential for MARA stock to see substantial long-term growth is definitely here.
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On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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