The recent launch of spot bitcoin ETFs appears to have driven some fund flows away from bitcoin mining stocks, according to a BTIG analyst, but he now sees plenty of shine in shares of Marathon Digital Holdings Inc.
Marathon shares
MARA,
are on pace for their sixth session in a row of declines, down about 30% since the close of trading Jan. 8. Their roughly 3% drop in volatile Wednesday morning trading comes even as BTIG’s Gregory Lewis upgraded the shares to buy from neutral, citing opportunities around transaction fees and the company’s operational shift.
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Lewis noted that Marathon stands to benefit from increases in bitcoin prices
BTCUSD,
thanks to transaction fees. “During periods of less BTC activity, fees can drop into the low single digits,” he wrote, but transactions on the blockchain are up to about 500,000 a day, and Marathon, with its share of global hash, could earn about 1,400 bitcoin a month for validating blocks.
“Bottom line: while fee revenue is volatile, it has historically increased with the BTC price,” he wrote, while acknowledging that it’s also tied to bitcoin adoption.
Lewis was also upbeat about a recent operational shift at Marathon, as the company recently closed on two bitcoin mining sites that give it 390 megawatts of operational capacity. The company’s mining portfolio is now made up of roughly 910 megawatts of capacity, 45% of which is tied to directly owned sites.
“[W]hile [Marathon] has largely operated its mining fleet on hosting provider’s infrastructure, these acquisitions pivot the company from asset-light to an infrastructure owner-operator, which we believe should allow [Marathon] to better control its power costs over time,” Lewis wrote.
Read: Vanguard’s decision to shun bitcoin ETFs triggers backlash — with some customers moving to crypto-friendly competitors like Fidelity
He set a $27 price target on Marathon shares, which implies about 50% upside from current levels of $17.90.
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