Why Marathon Digital's stock is sagging in the face of record earnings

By Emily Bary

Marathon has to boost its uptime to help profits, an analyst notes

Marathon Digital Holdings Inc. posted record earnings, but they could have been better if not for equipment- and weather-related disruptions that held the company back in the first quarter.

As such, Marathon shares (MARA) were falling 8% in Friday morning trading on the heels of that report. JPMorgan analyst Reginald Smith described a "bumpy start" to the year for the bitcoin-mining company.

"Bitcoin production and average hash rate declined sequentially due to equipment failures and spotty uptime," Smith wrote.

Read: Marathon Digital logs record earnings as it pushes past 'operational challenges'

Marathon's uptime is about 70%, according to Smith, who said a key for the company will be getting that higher. Better uptime - a measure of how efficient the company is with its mining operations - can lead to more profits.

While Smith has an underweight rating on Marathon's stock, he flagged "signs of improvement" and said that "the company appears wellpositioned to both increase hashrate and uptime, while decrease mining costs, in the coming months."

Hash rate describes the amount of power consumed by bitcoin mining, as MarketWatch's Frances Yue described earlier this year.

Needham analyst John Todaro pointed to a series of misses in the latest results. Revenue came up short, as did adjusted earnings before interest, taxes, depreciation and amortization, when factoring out bitcoin gains.

"We increased our [revenue] estimates to reflect increased hash rate coming online in [2024], but we also increased total network hash estimates, which partially offsets," he commented.

Todaro has a neutral rating on Marathon's stock.

Other bitcoin-mining stocks were falling in Friday morning action, with Riot Platforms Inc. (RIOT) down more than 4% and Hut 8 Corp. (HUT) down more than 1%.

See also: Bitcoin is trading sideways, but get ready for another rally in September

-Emily Bary

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05-10-24 1128ET

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