Bitcoin Miner MARA Stock Surges Despite Earnings Miss as Analysts Applaud Cost Cutting
Bitcoin miner MARA Holdings (MARA) stock outperformed peers on Friday, even after its first quarter results missed Wall Street's estimates, as the company's focus on lowering costs is seen as positive by analysts.
Jefferies analysts said that with the bitcoin BTC price improving in the second quarter of this year and MARA focusing on more sustainable energy sources such as solar and flared gas-driven data centers, power costs should come down in the coming quarters and help margins.
"MARA is expanding infrastructure at its 114 MW wind farm and has fully energized its 25 MW micro flared gas data center, both of which should drive down power costs," said analyst Jonathan Petersen in a note.
If the mining firm continues to buy up more of such power sources, it would help the company's profitability, Petersen wrote. "Continued acquisition of power assets is expected to further reduce energy costs, expand margins, and better prepare the firm for the next halving." Peterson reiterated his hold rating on the stock, while raising the price target to $16 from $13.
Bitcoin mining, once a very profitable business, has seen its profit margins crash drastically during the last bear market and even more so after the recent halving that cut the rewards by half. To make matters worse, rising power costs for mining have continued to plague the margins.
This squeeze has forced most miners to diversify their business into other sources of revenue, including hosting artificial intelligence (AI) and high-performance computing (HPC) data centers. MARA was among the few miners that didn't jump into the AI sector right away, but rather focused on other avenues of diversification, such as transaction revenue services, mining pool, buying bitcoin in the open market and lowering power costs via green energy sources.
The last point about lower power cost seemed to have struck a chord with the market.
H.C. Wainwright analyst Kevin Dede said that this is what separates MARA from its mining peers: "Commentary last night made it clear the company remains focused on technology development in its core vertical of power conversion ... with a peeled eye on driving energy costs to zero."
"We rehash this here in distancing MARA's strategy against mining competitors gently or forcefully migrating their mining businesses to address the rapidly evolving HPC opportunity," he said.
Dede, who has a buy rating and price target of $28, also seemed to echo the sentiment that MARA will be able to lower costs by focusing on these types of power sources.
"Our opinion on that aside for now, we agree with MARA's overarching objective to create opportunities by exploiting unused power or improving the efficiency of used power," he said.
MARA's shares rose as much as 9% on Friday, while the CoinShares Valkyrie Bitcoin Miners ETF (WGMI) has fallen about 0.3%.
Read more: MARA Holdings Cut to Sell at Compass Point Ahead of Earnings, Citing Cash Burn