Marathon Digital: Bitcoin Mining Titan with Huge Growth Plans (MARA)

Bitcoin wallet.  Golden Bit Coin virtual cryptocurrency or blockchain technology.  Gold Crypto currency BTC Bitcoin on black background.  Investing in virtual assets, bull market trend concept.


Cryptocurrency is an intriguing and unique asset class. As a contrarian investor, I aim to buy when others are “unbelievers” like in 2016, before the 2017 bull market. Also, I sell when everyone is buying. For example, in mine prival investment group, I told everyone I was selling my Bitcoin in February 2021. While I didn’t clock the top and could have held out for around 30% more gains, I also missed the 66% plunge from the highs November 2021 historical figures. However, now technical charts say Bitcoin has hit rock bottom (for now) and the asset has even had the best of it month from 2021, with the price up by ~ 20% compared to July.

Digital marathon (NASDAQ: MARA) is a leading Bitcoin mining company that serves as a leverage method for playing Bitcoin. As previously mentioned, Bitcoin’s price jumped 20% in July (blue line), however, Marathon Digital (orange line) rose 134% over the same period.

Marathon Digital (Orange) Vs Bitcoin (Blue)

Marathon Digital (Orange) Vs Bitcoin (Blue) (created by the author TradingView)

The technical data is showing signs of bullish momentum for Crypto and so I think it’s worth diving into Marathon Digital Holdings. A company that has bold management and big plans for future growth. Let’s get into the business model, growth plans, and my pricing goals for the juicy details.

Business model

Marathon Digital aims to build one of the largest Bitcoin mining operations in North America. Its mining operations are based in Texas (hosted by Compute North), Montana (hosted by Beowulf) and South Dakota / Nebraska (hosted by Compute North).

Bitcoin mining operations

Bitcoin mining operations (Investor presentation)

In Texas, the company is building and expects to field over 100,000 S19 miners. An S19 is a purpose built mining computer (manufactured by Bitmain). In the Texas facility, the S19s can mine Bitcoin at a rate of 10 EH / s (10 Exahash per second), where one exahash equals one quintillion hashes. For the uninitiated, “Hash Rate” is basically the mining speed calculated in “Hash Per Second”. This is the speed at which the mining computer can solve the encrypted puzzle for that block.

To add some realism to this whole setup I have included an image of one of the machines so you can visualize what the setup would look like. Imagine 100,000 of these machines tied together in a department store.

Antminer S19

Antminer S19 (bitmain)

Green mining is a competitive advantage

A key element of the company’s strategy is the focus on Bitcoin Mining powered by renewable energy sources. For example, its largest facility in Texas has 100% carbon-neutral mining operations. This is mostly powered by wind and solar farms in the United States. They also plan to move from the Hardin facility in the third quarter of 2022 to a more sustainable energy area. Powering mining operations from renewable energy sources is a big deal, as global Bitcoin Mining consumes more electricity than the country of Argentina! This equates to 150 terawatt hours of electricity per year.

Given the international battle against climate change and the number of ESG (Environment, Social, Governance) funds, Bitcoin mining must become sustainable. For example, Shark Tank investor Kevin O Leary reported in 2021 that he will not buy “Bloodcoin” referring to Bitcoin mined from non-renewable energy sources, he said in a direct quote;

“We have compliance on large institutions, we have agreements on how goods are made, if carbon is burned, if human rights are involved, if it is produced in China.” – Kevin O Leary

This leads to a powerful conclusion that all Bitcoins are not the same. Bitcoins mined from sustainable sources could potentially be worth more than bitcoins mined from other less “green” or unverifiable sources. Bitcoin ETFs, institutional investors and even companies that may want to own Bitcoin on their balance sheet will therefore likely be inclined to buy “clean coins”. Since Marathon Digital has verified zero-emission U.S. locations, this could provide them with a competitive advantage.

Lower mining costs

Part of management’s strategy is to “risk” the business by becoming more resilient to potential drops in the price of Bitcoin. Management plans to do this by leveraging its scale to negotiate favorable contract terms and be agile as Bitcoin rises and falls. Another way they can “risk” their operations and improve their margins is to cool their machines efficiently. Since all that computing power generates large amounts of heat and therefore cooling is a key consumer of electricity.

Immersion cooling of its miners via a liquid dielectric is something management has talked about in the past. The company predicts that this could result in increased efficiency and overclocking capability (running the GPU faster than standard speed) of up to 40%. However, it should be noted that installing such an immersion cooling system is expensive, and the proof that it will work is not defined.

Growth strategy

Marathon Digital’s growth strategy involves improving Bitcoin production by increasing the hash rate (mining speed). As you can see from the graph below, the company has increased its Bitcoin production over time and holds the asset given the volatility. It was interesting to see that the company has a sense of humor when referring to Bitcoin’s “HODLing”, perhaps appealing to its retail investor base.

Increase in Bitcoin mining

Bitcoin MARA mining (Investor presentation)

As of the first quarter of 2022, MARA produced 1259 Bitcoins, an increase of over 1,098 BTC in the previous quarter and was higher than other Bitcoin mining companies in the industry. At the time of writing, the company has 36,830 miners deployed at a speed of 3.9 EH / S. As previously mentioned, the Texas facility currently has up to 10 EH / S of mining speed, and the company estimates it can increase its overall hash rate to 23 EH / S, which is quick.

Management also has bullish growth plans to scale its Bitcoin miners from around 37,000 machines to over 200,000 by Q2 2023. These are bold plans, but historically management has struggled to keep up with their goals. The good news is that they recently took a win in late July 2022, as they secured around 200 megawatts of capacity from Applied Blockchain (NASDAQ: APLD).

Value of Bitcoin Holdings?

Knowing where Bitcoin’s price will be in the future is extremely difficult to predict and knowing its true value is virtually impossible to calculate. However, we can look at some scenarios of different Bitcoin prices and then estimate the value of Marathon’s holdings from this. In the table below you can see that I have extrapolated his total owned Bitcoin of 9,673 Bitcoins as of Q122 with various growth rates and scenarios for the Bitcoin price.

In the “worst case” (red), the company only produces slightly more Bitcoin than Q122 and Bitcoin is cut in half at $ 10,000 (July 2020 price). Given the ecosystem that has built around Bitcoin over the past two years and the number of companies that have since added Bitcoin to their balance sheets, I find this scenario unlikely but not impossible. This would appreciate the fund’s holdings at just $ 135 million.

Given the “best” scenario, Bitcoin skyrockets to the April 2022 level of $ 45,000 and the company ramps up its production rate until it has 16,500 Bitcoins held, worth ~ $ 810 million. Again, I don’t think this case will generate investor “risk rejection” in the short term, but in the long run it is a possibility. Therefore, if we take the intermediate scenario of $ 20,000 for the price of Bitcoin, which is slightly lower than the price of $ 23,000 BTC at the time of writing and thus production steadily increases speed, MARA would contain 16,500 Bitcoins worth ~ $ 330. millions. With a market cap of $ 1.38 billion at the time of writing, this would value it at four times its Bitcoin value.

Bitcoin MARA estimates

Bitcoin MARA estimates (created by author Ben at Motivation 2 Invest)

If I convert the above calculation into an approximate price target, I get ~ $ 8 / share in the worst case, ~ $ 13.50 / share in the mid-range, and $ 27 / share in the high-end. As the current price is ~ $ 13 per share, I believe the stock is a “HODL”, I mean “HOLD” at the time of writing.


Financial perspectives

Marathon Digital has bold plans, but remember it is based on future estimates. In the past 12 months, the company has produced just $ 193 million in revenue, with $ 13 million in gross profit and $ -46 million in operating income. Given that the company has a market capitalization of ~ $ 1.38 billion, this is a selling price of ~ 6.83 according to Seeking Alpha. This isn’t exactly cheap, but it’s 83% cheaper than its 5-year average price.

MARA revenue estimates for YCharts next fiscal year data

The company has a strong cash position of $ 336 million in cash and short-term investments. However, $ 729 million of long-term debt is quite high as the net profit is negative.


Bitcoin is supposed to be a hedge against inflation, but so far this correlation has not occurred. Historically, Bitcoin and Bitcoin mining stocks have been traded as risky growth stocks. The rising interest rate environment caused a large devaluation of many growing stocks and therefore the appetite of retail investors was dampened. Block (SQ) (Square) saw its Bitcoin trading revenue plummet in its cash app in the last quarter.

When people “feel rich” they are happy to invest in speculative assets, but when people have the costs of living such as food and energy crushed by inflation, saving money becomes a priority.

Final thoughts

Marathon Digital is an established player in the cryptocurrency mining industry. The management of him is bold and foresees huge growth in the future. The success of this title will be based on two factors, the first is the management’s ability to execute their growth plans, the second is the price of Bitcoin. The multiple scenarios I have outlined show that the stock is trading in an intermediate scenario for both Bitcoin’s price (after the recent rally) and production estimates. However, the financial data is still based on future estimates and therefore the stock is suitable for a spot in your speculative portfolio or as a trading asset, but after the recent rally it may be worth keeping until the next earnings announcement for the second quarter. of 2022.

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