- Marathon Digital share price has rebounded in the past few days.
- The recovery is mostly because of the strong performance of Bitcoin prices.
- The company has been a dilution machine as the total outstanding shares have risen.
Marathon Digital (MARA) stock price has staged a strong recovery after bottoming at $7.15 in October. It has recovered to almost $12, the highest point since September 8th. It remains much lower than its highest point this year.
Bitcoin rally losing steam
Marathon Digital is one of the biggest Bitcoin mining companies in the world. It is a publicly traded company with a market cap of over $2.54 billion. It mines over 3,400 Bitcoins every month.
In most cases, Bitcoin mining companies do well when the price of BTC is rising because of their ability to sell their mined or hoarded coins at a higher price. This also happens in mining of physical commodities like copper, gold, and lithium.
As a result, MARA stock price has jumped by more than 230% this year as Bitcoin has more than doubled. Other mining stocks like Riot Platforms, Hut 8 Mining, and Cipher Mining have all jumped.
Marathon has recovered modestly as the price of Bitcoin has held steady between $37,000 and $38,000. If the status quo remains, it means that the company’s revenue in the fourth quarter will be higher than what it made in Q2 and in Q4’22.
The most recent quarter showed that Marathon Digital revenues rose to a record $97.8 million in Q3 as the average daily Bitcoin production rose to 38. At the current price, it means that the company is making over $1.45 million every day. MARA’s costs continued rising, with the cost of revenue surging to $113.2 million.
Marathon Digital holds vast amounts of Bitcoins in its balance sheet. It ended the quarter with 13,716 coins that are valued at over $510 million. It also had over $101 million in restricted cash.
MARA faces numerous challenges. For example, it has been a dilution machine over the years as the number of outstanding shares jumped to 210 million from 102 million in 2021. Dilution happens when a company issues more equity and adds it to the existing one.
The other challenge is the upcoming Bitcoin halving, which will lower the amount of Bitcoin rewards given to mining companies. Further, there are signs that Bitcoin price has stalled and is struggling to move above $40,000.
MARA stock price forecast
Turning to the daily chart, we see that the MARA stock price has recovered modestly, helped by the strong Bitcoin price action. This recovery is in line with what I predicted a few weeks ago.
The shares have moved above the 50-day and 25-day Exponential Moving Averages (EMA). It is also a few points above the ascending trendline that connects the lowest points in December and October.
MARA shares are also nearing the important resistance point at $12.81, the highest point on April 18th. Therefore, the short-term outlook for the stock is bullish, with the initial level to watch being at $12.8. The stop-loss of this trade will be at $10.
