Despite blockchain miner Marathon Digital (NASDAQ:MARA) beating earnings expectations, MARA stock plunged 20% on Thursday before paring back some of the red ink. Jitters associated with the recent surge in the crypto market are likely behind the fallout. Still, investors are looking to a major development that could lift the entire blockchain ecosystem.
According to MarketWatch, Marathon posted fiscal fourth-quarter net income of $151.8 million, or 66 cents per share. This result beat the expected per-share profit target of 4 cents. It also compared favorably next to the year-ago period’s net loss of $391.6 million or $3.13 per share. Reportedly, the red ink from Q4 2022 “included more than $300 million in impairments of mining equipment and vendor advances.”
On the top line, Q4 sales landed at $156.8 million, up considerably year-over-year from $28.4 million. Analysts had expected the company to print $148.8 million in sales.
“Given our momentum, our strong balance sheet, and the differentiators we are building with our technology stack, we are optimistic that the most exciting times for our organization are still to come,” said CEO Fred Thiel.
Nevertheless, as TipRanks notes, Marathon posted a loss of 2 cents “when excluding the impact of the new FASB [Financial Accounting Standards Board] fair value accounting rules.” These rules call for the “measurement of crypto holdings at fair value.”
Why is MARA Stock Down? Blame Crypto Cold Feet.
Still, even with the accounting nuance reflected, that doesn’t appear to explain the horrendous loss in MARA stock today. Other company-specific concerns — such as Marathon’s Wednesday prospectus filing regarding a proposed mixed shelf offering — don’t seem to fully explain the fallout, either.
Notably, other blockchain miners like Riot Platforms (NASDAQ:RIOT) and Cipher Mining (NASDAQ:CIFR) have also suffered steep losses today. Riot released its Q4 2023 earnings on Feb. 21 while Cipher is set to report Q4 results on March 5. For the period, Riot posted earnings of 45 cents per share compared to an expected loss of 28 cents.
With that all in mind, the likely culprit today may be cold feet regarding the cryptocurrency ecosystem, particularly the benchmark blockchain asset. Of course, the sector has been surging lately, with Bitcoin (BTC-USD) within striking distance of all-time highs. However, it’s also natural for some bulls to get cold feet and elect instead to secure profits given the volatility of this space.
The same could be said about MARA stock. Currently, MARA features short interest of nearly 19%, per Fintel.
Nevertheless, the big prize for crypto investors is the upcoming halving event for Bitcoin. Scheduled to occur in April, the reward for mining the asset will be cut by half. As a result, the implied crimping of supply on a hot commodity may lift the price of BTC, thereby raising the entire crypto ecosystem.
Why It Matters
Similar to the cryptocurrency market, MARA stock is often wildly choppy. Subsequently, analysts currently rate shares as a consensus hold. Still, at the moment, the put/call open interest ratio in the options market sits at 0.64 as of this writing, indicating higher interest in call options than puts. This could suggest that traders are buying the dip.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article.The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
