Marathon Digital Sell-Off a Buying Opportunity, DA Davidson Analyst Says

The 27% drop in bitcoin miner Marathon Digital’s (MARA) shares on Nov. 15 was “overdone” and thus presents a buying opportunity, DA Davidson analyst Christopher Brendler said in a note.

• On Monday, Marathon disclosed in its 10-Q filing that it received a subpoena from the U.S. Securities and Exchange Commission (SEC) to produce documents and communications concerning its Hardin, Montana, data center facility.
• The firm also said the SEC is investigating whether the company has been in violation of federal securities law.
• In addition, the company said it is raising $500 million in convertible senior notes to buy bitcoin and bitcoin miners, a raise that was later upsized to $650 million.
• A convertible note is a debt instrument that contains an option for the holder to convert the note into a set amount of the company’s shares.
• DA Davidson’s Brendler said he doesn’t see much risk around the potential securities violation and that the new funds will help the miner continue to grow “its industry leading 1H22 ramp.”
• “With the stock trading at 9x our updated 2023 adjusted EPS estimate, the risk/reward has improved dramatically in just 24 hours,” Brendler wrote.
• Brendler reiterated his “buy” rating on the stock and maintained a 12-month price target of $65 per share.
• Shares of Marathon were up 1.8% in recent trading, while those of the company’s rivals fell in tandem with the day’s drop in bitcoin and ether prices.