First of all, MARA (Ticker symbol: MARA) is a Bitcoin mining company. Marathon is a digital asset technology company that mines cryptocurrencies, with a focus on the blockchain ecosystem and the generation of digital assets such as Bitcoin.
Marathon Patent Group Inc. is all about Bitcoin mining. As the price of Bitcoin goes up, so does the stock price.
The stock currently trades at $3.50 USD with 52M outstanding shares total. The company is not yet profitable and expects to be profitable in Q2, 2021.
In this article, let’s take a deep dive into the MARA stock and why I think it can easily 15X or more of your money in the next 1 year.
MARA Stock Overview
Before we proceed, let us quickly take a look at the MARA stock chart over the past 1 year.
As you can see from the chart above, MARA which had peaked at $5 per share is now back to $3 levels. All thanks to the fluctuating price of the Bitcoin.
Here’s Marathon Stock in 2021:
MARA will be mining an average of 20 bitcoins per day, 7000 a year, here, depending on BTC price:
7000 x $20000, U$140 million, EPS 3
7000 x $40000, US280 million, EPS 6
7000 x 100000, US700 million, EPS 13
Multiple of P/E – 20-25 (S&P average is 31X), worst case $75 (15X from current price), best case $250.
Let me repeat this one more time, MARA stock price rises with the Bitcoin price increase and fades away if the price goes down. That’s the risk you need to be aware of before investing in Bitcoin mining companies.
But, here’s the thing right, Bitcoin’s price is at almost $18,000 USD right now and it’ll continue to rise further.
Bitcoin Price and MARA Stock Prediction (The Relation)
Bitcoin’s prediction is that the price will reach levels of $100,000 or $300,000 in the near future.
Further affecting the Bitcoin industry, and particularly for the bitcoin blockchain and mining companies, the cryptocurrency reward for solving a block is subject to periodic incremental halving.
Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm.
At a predetermined block, the mining reward is cut in half, hence the term “halving”.
For Bitcoin, the reward was initially set at 50 bitcoin currency rewards per block and this was cut in half to 25 on November 28, 2012, at block 210,000 and again to 12.5 on July 9, 2016, at block 420,000.
The next halving for bitcoin is expected in May 2020 at block 630,000 when the reward will reduce to 6.25. This process will reoccur until the total amount of bitcoin currency rewards issued reaches 21 million, which is expected to occur around 2140.
A couple of factors driving up the prices to these levels include:
Bitcoin’s wider acceptance: Well, firms such as Paypal, Square and other top financial institutions around the globe are now accepting and investing in Bitcoin. The acceptance of Bitcoin is not only getting bigger but the demand is sky-rocketing as well.
Limited Bitcoin Supply: There’s are cap on the number of Bitcoin’s available. The total Bitcoins that can be mined stands at 21 Million. That’s the total Bitcoin that can ever be. Even though it will take around 120 years (estimates) to reach the number, there are only 2.5M Bitcoins left to be mined worldwide.
MARA is the largest Bitcoin miner in North America. Starting from Q2, 2021 Mara will be a profitable company producing 15-20 Bitcoins per day. To produce 1 Bitcoin, the overall costs incurred by MARA will be around $3.8K (including electricity costs and others)
As the demand for Bitcoin increases, with limited supply, the price of Bitcoin will go to the moon. So will the price of the MARA stock.
Bitcoin’s price does not fade away or get affected by inflation. Since the beginning of the pandemic, banks around the globe are printing more money to keep the economy afloat and as a result, the interest rates are nearly 0%. The dollar rates are quickly falling and this is something that’s causing the rise in Bitcoin prices. Remember, Bitcoin’s price is not affected by inflation or currency prices.
Even though there are several cryptocurrencies available in the market, Bitcoin is by far the most widely accepted and recognized cryptocurrency in the world.
- MARA’s 3.6 Eh/s hashing power yields 12M in profits a month at BTC $18,300. 144M a year/52M outstanding shares = 2.77 EPS. 10-15 multiple gives you a $27.70-$41.54 price target. BTC 25k yields over $50, BTC 30k over $70, BTC 60k over $120.
Why Is MARA Still a Penny stock?
A couple of reasons why MARA is still a penny stock:
MARA is not yet profitable. Yes, you heard it right, even though the company is producing Bitcoin’s and the Bitcoin price is on the rise, MARA is not yet profitable. The reason is quite simple, MARA is burning more cash to produce the Bitcoin than the actual price/revenues generated.
Outstanding Share Float – The company has recently purchased a huge number of Bitcoin miners to increase productivity and as a result to fund the purchase the company has issued shares in the open market which has led to a liquidity increase and the stock price going down further.
The Management at MARA has a history of gambling with the stock market – whether its reverse stock splits or liquidity which has led to its downfall to a penny stock.
- However, with the increase in the Bitcoin prices, the stock which was trading at 80 cents is back to $3.50 levels.
Why I Believe MARA stock will 10X in 2021 or much sooner
Please note, MARA is an extremely risky and speculative stock. So, trade with caution.
In this section, let us discuss the potential points which will lead to 10X in the stock price:
“With only 2,060 miners in operation in September when Bitcoin was trading at $10,000, the company generated $650,000 in Bitcoin revenue, our largest quarterly Bitcoin revenue in history. By the end of the 2nd quarter in 2021, we will have 23,560 miners deployed which equates to a greater than 1100% increase in mining capacity. At current Bitcoin prices, our deployment of new miners has the potential to produce more than an 11 fold increase in our monthly revenue as compared to our September 2020 revenue production.” – Merrick Okamoto, Marathon Patent Group’s CEO statement.
Starting June 2021, Marathon will start producing 15-20 Bitcoins per day. The average cost of producing 1 BTC will be $3,863.(as per the company’s Investor’s relation page). Considering the current BTC price of $19,000 USD, that’s a profit of $15,000+ per BTC mined. Marathon expects to be profitable starting in June 2021 (Q2) generating over $8M in profits per month. (at the current bitcoin prices)
Currently, even though MARA is producing a couple of BTC’s per day. The losses that you see on the balance sheet is because of the electricity cost involved in producing the Bitcoin’s. To address this issue, Marathon Group has entered into a long term relationship with Beowulf Energy. Through this partnership, the cost of electricity required to produce Bitcoins substantially reduces to $0.028 Kw/H, increasing MARA’s profits further.
With the surge in Bitcoin prices, MARA’s profitability is more or less secured. If the price of Bitcoin increases to $50,000 for example, that’s a profit of 20 Bitcoins*(50,000 (Price of Bitcoin)-$3,800 (the cost to produce a Bitcoin)*30 days = $27.6M in profits every month. Like I said earlier as Bitcoin is more widely accepted around the world, and with the limited supply of Bitcoin at 21M, the demand and the price of the digital currency will naturally increase over time.
MARA recently hired their new CFO, Mr. Salzman, which is an excellent move to make sure the company financials are all good. Along with the new CFO, Marathon Group has also entered into a partnership with “Gateway Investor Relations” to make sure the Investor’s relations page is all up to date and being tracked in the best practices.
Marathon Patent Group’s Recent Quarterly Report
In this section of the post, let us quickly take a look at the recent quarterly report of the company.
Even though the Cryptocurrency mining revenue stood outstanding at $800,000, just look at the expenses in terms of producing the Bitcoin. It’s a staggering $1.6M (that’s double the price of profits generated). So, the expense for producing one bitcoin is almost double the actual revenue made.
But the good news is that, as we have already discussed, Marathon Patent Group has entered into a low-cost electricity agreement which should further enable them to produce the Bitcoin at much lower and fixed power rates.
The net losses for the quarter stood at $1.94M dollars.
MARA should be profitable from Q2, 2021 onwards.
MARA vs. RIOT
Mara and Riot are both Bitcoin mining companies.
While both of these companies trade on NASDAQ, they have very similar businesses – Bitcoin Mining (blockchain).
While RIOT’s hash rate capacity was 456PH/s before Nov, it increased to 566PH/s in Nov as they took delivery of 1,000 S19 Ant miners.
MARA by comparison had a deployed capacity of 320PH/s through Nov and now into Dec with no change. That is 56% that of RIOT and therefore yields a 56% lower share price today as we see.
Now here is the story.
RIOT has 8,000 S19s to be fully delivered and deployed bringing the total hash rate to 1.45EH/s (1,446PH/s.) That represents a 351% increase in mining capacity by Q2 2021.
MARA on the other hand has 20,500 S19s to be fully delivered and deployed by Q2 2021 raising the total hash rate to 2.56EH/s (2,562PH/s.) That represents a 701% increase in mining capacity by Q2 2021.
Key Differences between MARA vs. RIOT
1) MARA owns its own facility and has a 5-year energy contract and their energy provider Beowulf has a vested interest in MARA’s success as they own shares.
2) RIOT doesn’t own its own facilities, instead is hosted by a company Coinmint which is literally suing itself (cofounders are fighting to dissolve the company) and their contract expired and is now 3 months rolling and cancellable at any time.
3) MARA has zero debt.
So, is Marathon Patent Group or MARA a buy at these levels? The stock’s trading at $3.50 around today. Or should you rather invest in Bitcoin directly?
Even though I’m not recommending this stock to anyone, the final choice is yours.
However, you need to note that, this stock can probably 10X or 20X in the next 1 year alone. It all depends on a number of factors such as:
How well will MARA be able to execute as per the plan they have outlined to be profitable by Q2,2021.
Will Bitcoin prices keep soaring as it is right now?
The other main issue with MARA is the outstanding stock float rate, will MARA continue to liquidate the stocks to purchase more Bitcoin miners? If so, then it may lead to the further downfall of the stock.
As you can notice, MARA is not an easy pick.
So, if you want to expose a small percentage of your portfolio to this risky stock and find it rewarding in the near future, it’s all up to you.
Thanks for reading! Please let me know your thoughts and comments below.
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.