Funding financial institution Compass Level downgraded MARA Holdings (MARA) to a promote ranking from impartial on Tuesday, citing unsustainable money burn.
“There’s higher methods to get BTC beta,” analysts wrote within the analysis notice, pointing to Marathon’s hash worth, now under 5.5 cents, as a sign of declining profitability. At present operational ranges, Compass Level estimates the corporate is dealing with important money burn that would result in shareholder dilution.
The financial institution additionally slashed MARA’s worth goal to $9.50 from $25, suggesting greater than 25% draw back from the present worth close to $13.
Marathon’s enterprise depends on bitcoin mining, a course of that earns BTC in alternate for computing energy. Nonetheless, as mining rewards shrink and power prices persist, the economics of the enterprise mannequin have come beneath strain. In the meantime, Compass Level argues that Marathon trades at a premium to the value of bitcoin itself—an unfavorable setup for buyers looking for publicity to the asset.
The downgrade additionally comes amid a broader hunch in high-performance computing (HPC) and AI infrastructure performs. Peer corporations Core Scientific (CORZ) and TeraWulf (WULF) have additionally underperformed year-to-date as investor enthusiasm round AI has cooled. Considerations over buyer focus, pricing dangers, and slowed capital expenditures from giants like Microsoft have dragged valuations down, with HPC sector multiples dropping from as excessive as 15x final yr to round 5x at present.
Nonetheless, Compass Level famous potential tailwinds for the sector in the long term, together with rising demand for AI infrastructure and capex commitments from cloud suppliers. However for now, they argue Marathon’s fundamentals stay too weak to justify its market valuation.
MARA is reporting earnings on Could 8, post-market. The inventory fell 25% this yr, whereas a bitcoin mining ETF, WGMI, fell 37%.
UPDATE (Could 6, 16:27 UTC): Updates headlines and provides MARA’s earnings time.
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