MARA share worth over 45% more thanks to increased bitcoin sales

Marathon Digital Holdings (NASDAQ:MARA), the U.S. cryptocurrency mining company, recently updated investors on its operations and holdings in Bitcoin (CCC:BTC-USD). This could lead to a rise in the MARA share in the long term, especially since its future is rather bright.

On September 3, the company reported that it is now producing Bitcoin at a rate of 469.6 BTC per month. Additionally, the company has accumulated 6,695 BTC tokens. So, at the September 15 price of $ 48,207 per BTC token, their holdings are now worth $ 322.75 million. This equates to 8.7% of its market value of $ 3.691 billion.

Additionally, on September 15, the company posted a very informative slideshow on its website. This will help investors gauge the future of the business now that China is literally out of Bitcoin mining.

Implications of the investor presentation

First of all, the slideshow shows that the company is extremely profitable on an underlying basis. Page two shows that Marathon’s base mining cost on a “mixed” basis is only $ 5,612 per BTC. Since Bitcoin’s price was $ 48,207 yesterday, its underlying margin on a gross basis is around 11.6%. This is one of the lowest gross margins I have ever seen and indicates incredible profitability.

Then the company predicts that if all of its miners were up and running today (some are on delivery), it would have revenue of $ 1.43 billion. That’s 5.7 times the $ 251.5 million analysts surveyed by In search of the alpha forecast for 2021 and nearly double its forecast revenue for 2022 of $ 783.93 million. As a result, I suspect analysts will update their 2022 estimates shortly.

The company has made it clear that its goal is to maximize its return on assets (ROA). For example, one way to do this is to buy BTC mining equipment, also known as miners, at very low prices. Page 11 of the slide set shows that he expects to be able to earn 109% per year on the $ 30 million invested in miners.

Another way to achieve this is to have your own hosting facilities, as discussed on page 10. He expects to achieve an ROA of 9.3% per year with this method.

Finally, the company has contracted for its electricity needs at an advantageous rate.

Where that leaves MARA Stock

If we believe the Marathon story that it will reach $ 1.4 billion in sales, then Marathon stock, at a market value of $ 3.691 billion, is trading at just 2.63 times sales.

But if you believe analysts’ forecasts for sales of $ 784 million in 2022, they are trading at 4.7 times sales. Last month, I wrote that Marathon’s peers are trading at an average price / sales (P / S) multiple ranging from 3.7x to 20.4x 2022 sales.

The average is equivalent to 13.7 times P / S. Let’s decide to be too conservative here, just to add a margin of safety. If we took half of this ratio, and if we used analysts’ forecasts, the P / S multiple would be 6.85 times.

Using the sales forecast of $ 784 million for 2022, the target market value is expected to be $ 5.37 billion. It could be significantly higher if revenue hits $ 1.4 billion, as the company seems to predict. That’s 45.5% more than Marathon’s current market cap of $ 3.691 billion.

As a result, MARA stock is worth $ 53.91, which is 45.5% more than its September 15 price of $ 37.05.

What to do with MARA stock

Analysts tend to agree with my price. For example, TipRanks.com says three analysts who wrote on the stock in the past three months have an average price target of $ 48. This is 29.6% compared to yesterday’s price.

In reality, In search of the alpha reports that three (presumably different) analysts have an average target of $ 61.67, or 66.45% more. So the average of these two surveys results in a target price of $ 54.84 per share, which is close to my target price of $ 53.91.

This means that the enterprising investor should be prepared to start buying MARA shares. Keep in mind that if the company’s revenue explodes this year, the average purchase price will be higher each time.

As of the publication date, Mark R. Hake was long in Bitcoin, but no other securities mentioned in the article, either directly or indirectly. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.

Mark Hake writes about personal finance on mrhake.medium.com and run the Total Value of Return Guide that you can consult here.