Investment Bank Jefferies Downgrading Bitcoin Mining Firm Marathon Digital
The Investment bank Jefferies notified investors on January 8 decision to downgrade Marathon Digital, citing its inability to honor the schedule for the ongoing constructions. The Sunday note warned investors that the Bitcoin mining firm could not meet the construction schedule, a reason for downgrading Marathon Digital Holdings (MARA) from a hold to buy category.
Revised Targets for Marathon Digital
The Jefferies statement decried the elusive transparency and worsening mining economics as compounding the MARA’s execution risks, particularly affecting the hosting partners. In particular, Jonathan Petersen echoed his colleague Amanda Santillo’s views that Marathon Digital suffered significant transparency concerns regarding the construction schedule. As such, Petersen concurred with Santillo’s view to downgrading MARA’s pricing level from the initial $12.5 to the revised $4 target.
The Sunday statement observed that Marathon Digital Holdings utilized the asset-light model, which leverages counterparties to host its mining equipment. The absence of purpose-built infrastructure denies Marathon Digital access to spot and avert construction delays. Jefferies noted that most counterparties are battling significant delays, implying that Marathon Digital’s investment cannot generate earnings.
Is Marathon Replicating Missed Target?
Jefferies indicated that the mining equipment ordered by Marathon with an estimated computing power of 23 exhash/second (EH/s) would take longer before they start running. The investment bank’s note added that the equipment could start running in the last quarter of 2023 rather than at the initial projection of mid-2023.
Scrutiny of shares performance shows Marathon Digital Holdings has weathered the downgrade. At press time 1118 UTC, the MARA share is up 4.6% in a day to exchange at $4.09 while sustaining a five-day uptrend at 24%.
The delayed constructions replicate the previous year’s shortcoming, where Marathon missed the 2022’s hash rate target of 9EH/s. The target miss arose from the delay in securing the timely energization of 2.1 EH/s computers within Applied Digital’s (APLD) hosting center in Texas. The counterparty attributed the delay to the regulatory approval to ignite the machines.
The BTC miner could not meet the new target even after revising it from the 11.5 EH/s during the 3rd’s quarter report filing. It coincided with the power curtailment experienced in Texas that negatively affected the King Mountain site.
Way Forward to Sustain Growth
Beyond the inability to reap earnings from mining equipment from the delayed construction, Marathon Digital is optimistic about sustained growth in 2023.
In particular, the financial year started on high gears with the BTC miner settling $30 million revolving obligations it owed the embattled crypto lender, Silvergate Bank (SI). The payment allowed Marathon to free up 3,615 BTCs it pledged as collateral to the facility.
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