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Why Is Marathon Digital Holdings Stock Down Amid Bitcoin’s Downturn?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
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MARA Holdings Inc. is facing a challenging start to the week as its stocks have been trading down by -6.97 percent on Monday. This sharp decline seems to be influenced by the broader cryptocurrency market trading lower due to a significant drop in crypto liquidations. Additionally, the tech sector’s instability, marked by disappointing quarterly updates from other companies, may have compounded the negative sentiment surrounding MARA Holdings.

Summary

  • Bitcoin and other major cryptocurrencies dipped, directly affecting Marathon Digital Holdings, a company focused on bitcoin mining.
  • A persistent decline in major digital assets disturbed the crypto market, impacting company’s valuation negatively.
  • Marathon Digital Holdings reported a dip in Bitcoin production along with an increase in its energized hash rate, leading to a share price drop.
  • Trading volumes and market values within the cryptocurrency industry show a broader bearish trend.
  • Marathon Digital Holdings shares fell due to its close ties with the fluctuating market of digital assets.

Candlestick Chart

Live Update at 13:32:07 EST: On Monday, September 30, 2024 MARA Holdings Inc. stock [NASDAQ: MARA] is trending down by -6.97%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Quick overview of Marathon Digital Holdings Inc.’s recent earnings report and key financial metrics

Recent Earnings and Financial Health

Marathon Digital Holdings, a titan in the bitcoin mining industry, has faced various rollercoasters recently. The company reported a revenue of $387.5M and while that might sound hefty, the profitability ratios show they’re skating on thin ice. The operating revenue for the recent quarter is $145.1M, but their total expenses tower at about $195.8M. Moreover, their quarterly net income landed in the negative territory at -$199.7M. So yes, they made a decent buck but spent even more.

The profitability margins paint an equally perplexing picture. EBIT margin stands at 9.6% and EBITDA margin soars to 65.1%. However, peculiarly, the pre-tax profit margin is at -31.4%, indicating the company is leaking away money before taxes even come into play.

Financial stability is one area where Marathon Digital Holdings flexes, at least a bit. With a current ratio of 3.6 and a leverage ratio of 0.7, the company retains a strong financial backbone. However, the quick ratio of 2.6 shows they can cover their short-term obligations relatively comfortably, but they aren’t exactly cash-loaded when looking at long-term debt angles. Their long-term debt clocks in at $346.5M, which isn’t featherlight.

On the asset front, Marathon commands substantial numbers. Total assets amount to over $3.1B. Key highlights include total non-current assets, which are a hefty part of this valuation. Additionally, receivables turnover is astonishingly high at 1,488.7, indicating that the company collects its dues speedily. However, their return on assets (ROA) at -3.7% and return on equity (ROE) of -4.4% indicate inefficiencies in using assets to generate profits.

Significant Financial Notes

The company’s EPS stands at -0.72, and diluted average shares are about 278.7M. This EPS points to Marathon struggling to be profitable on a per-share basis. The shareholder equity stands tall at $2.6B, yet recent trends in stock prices indicate a lack of investor confidence.

Their financial reports reveal significant swings in cash flows too. Operating cash flow is -$115.2M, driven by operational losses. Investing cash flow trends similarly, being -$278M, led by notable investments and changes in working capital. Financing cash flow is the odd one out with a positive trend at $336.9M, courtesy of common stock issuance which padded Marathon’s pockets with an additional $344.95M.

What stands out is the decline in cash from beginning to end of the reporting period, from $324.3M to $268M. This indicates more outflow than inflow, a possible red flag for sustained operations.

Impact of News Articles

Recent bearish trends in cryptocurrency markets have impacted Marathon Digital Holdings’ stock. Bitcoin’s retreat below the $64,000 mark has driven companies like Marathon, whose fortunes are tightly bound to cryptocurrencies, into financial turbulence. The tumbling of Bitcoin even below $56,000 induced a broader ripple effect across major digital assets, compounding the bearish sentiment.

Considering the MARA’s latest hash rate increase juxtaposed against Bitcoin production dipping 3%, the market response has been rapid and mostly negative. This reflects directly in recent trading sessions where pre-market activities saw a notable drop in MARA’s share price, correlating directly with Bitcoin fluctuations.

More Breaking News

Impact of the Bitcoin Downturn on MARA Stock

Bitcoin and the Chain Reaction

Bitcoin holds immense sway over the crypto market; when it sneezes, the entire sector catches a cold. The recent drop below $64,000 has hit smaller, interconnected ships like a tidal wave. Companies riding the cryptocurrency wave, including Marathon Digital Holdings, have been among the hardest hit. It’s like a domino effect, except Marathon is a major domino in this chain.

When Bitcoin peaks and dips, a direct ripple reverberates in the market. Marathon’s stock price movements closely mimic these tidal waves. The drop to below $58,000 level for Bitcoin, as reported recently, has reverberated like rolling thunder, leaving a trail of bear scat right in the path of Marathon Digital Holdings.

Why Cryptocurrency Firms Prospect Bleakness

Cryptocurrency mining firms, including Marathon, are directly hit when Bitcoin retreats. A drop in digital asset values translates into reduced revenue, higher operating costs, and pressures on balance sheets. It’s akin to finding lighter fluid but lacking a match to light it. High depreciation and amortization expenses multiply woes.

Even if Marathon expands its hash rate (the computational prowess to mine Bitcoin), the return-on-investment weakens significantly if Bitcoin’s value drops. Hence, despite notable operational improvements, Marathon’s stock takes a beating due to the broader lower valuation of digital assets.

Financial Performance Under the Lens

Let’s probe deeper into Marathon’s core financial performance. From its latest income statement, the company shows an EBITDA margin of 65.1%, illustrating a strong operating performance before factors like depreciation and taxes set in. Yet, EBIT margin plummeting to 9.6% and a horrid pre-tax profit margin at -31.4% signal inefficiencies, cause for alarm in an investor’s eye.

Marathon’s returns, or rather lack of, paint a mosaic of troubles. Return on Capital (ROC) rests sourly at -57.95%, and return on equity perennially red at -4.44% murmurs discontent among its shareholders. These numbers reflect a struggle to convert financial investment into tangible returns. The crypto turbulence only adds salt to these open fiscal wounds.

Current Market Trends

The sequential daily closing prices chart for MARA shares unearths a downward trajectory. Closing at $16.385 on Sep 30, 2024, down from peaks seen days earlier highlights a jittery market. The intraday chart illustrates a fight to stay above water, with closing prices consistently hovering under opening prices.

Heavy trading volumes reflect investor unease, with shifts leaning southward akin to a poorly balanced seesaw. The bid to energize the hash rate by 11% yet experiencing a drop in Bitcoin production interplays complexly with market sentiment skewed bearish.

Analysis of the broader crypto market contextualizes the slump. A synchronous dip amongst leading digital assets mirrors across equity markets, pulling down MARA alongside major indices. Lesser trading volumes, dwindling market value, and slumped trading volumes underline prevalent bearish cues, dimming the halo around cryptocurrency.

Closing the Story of MARA in this Crypto Winter

Marathon Digital Holdings remains chained to the vicissitudes in cryptocurrency value, shaping its destiny. A picture emerges of strained profitability but resilient operational metrics, set against a backdrop of market volatility. As Bitcoin stumbles, companies like Marathon find themselves grappling to uphold investor confidence.

The recent Baitcoin production dip, alongside operational maneuvering like hash rate augmentation, reflects efforts to sustain amid market chaos. However, the financial metrics far from sing praises, with only operational resilience pointedly keeping afloat amid a bearish storm. Revenue surges yet hemorrhaging expenses tell a tale of fiscal mismanagement in part but also a sector grappling broader echoes of a market downturn.

It is this intricate tapestry of boom-bust cycles that underline investments in firms like Marathon, pivotally tethered to the gyrations of Bitcoin’s value. While cautious of the dips, savvy stakeholders perhaps await the next bullish wave. When this rise commences is anyone’s guess, but fortunes of the digitally inclined─like Marathon─tether sturdy on Bitcoin’s next ascent. For now, keep pondering: to buy, hold or strategize a guard as this crypto winter unfolds.

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”