There is a possible shift towards AI data center management.
Months ago, Marathon announced that it was also mining an altcoin.
The company Marathon Digital Holdings (MARA), recognized worldwide for being one of the giants of Bitcoin mining, is exploring new horizons.
Despite profitability challenges in its core business, its unsuccessful foray into kaspa (KAS) mining, Artificial intelligence (AI) is presented as the option that could redefine your future.
The financial analysis group, Value Kicker, points out that investing in MARA shares currently may be, in his opinion, a good strategy. It is based, for this, on the fundamental analysis of the company.
Although the Bitcoin halving negatively impacted Marathon’s revenue, the company has managed to recover better than expected, according to analysts. This has led them to look again at the company, since it now seems to have “interesting paths” ahead.
Below you can see a graph of TradingView with the price of MARA shares so far this year on the stock market.
In its most recent report, Marathon Digital Holdings showed growth in its Bitcoin mining operations. Its hash rate, a metric used to evaluate miners’ efficiency, reached 36.9 EH/s, up 5% from August and a considerable increase from 31.5 EH/s in the second quarter of 2024.
The company mined 705 BTC in September, 673 BTC in August and 692 BTC in July, adding approximately 2,070 BTC in the third quarter, a slight increase from 2,058 in the previous quarter.
This steady growth suggests Marathon is on track to reach its goal of 50 EH/s by the end of 2024.
However, what Value Kicker is concerned about as investors is the fact that Marathon “is not profitable on a gross revenue basis from its bitcoin operations.”
“As a growth investor, I have become quite forgiving of technology companies that report and maintain negative net income for long periods of time.”
Value Kicker, financial analysts.
How can Marathon achieve profitability?
For specialists, There are two main paths for Marathon to achieve profitability: increase revenue or reduce costs.
Simply increasing the hash rate will not solve the problem, since the company would continue to lose money on each bitcoin mined if it fails to reduce the cost per coin, they explain.
In the second quarter of 2024, Marathon reported total cost of revenue of $181 millionwith a cost of $88,287 per BTC mined, well above the average market price of between $56,000 and $70,000 per BTC.
Although Revenue expected to improve due to possible rebound in bitcoin pricewhich is currently around $68,000, is still not enough to cover production costs.
Raid on Kaspa mining
Seeking to diversify its sources of income, Marathon surprised the market in June 2024 by announcing its foray into mining Kaspa (KAS), an emerging cryptocurrency with promising profitability margins, as reported by CriptoNoticias.
However, mining kaspa has proven to be three times more difficult since then, which has affected the expected results. Although Kaspa promised to be a lucrative line of business, the results so far have not been encouraging.
Measures to reduce costs and new sources of income
Aware of its challenges, Marathon has begun to vertically integrate its operationswhich could reduce its costs, analysts point out.
The company announced that it is in the process of converting its data center in Texas to dip containers, seeking to improve efficiency and reduce the cost per bitcoin mined, said a Marathon statement.
Although these measures are positive, it will take more quarters to see its true impact.
As for new sources of income, the company has explored initiatives such as taking advantage of the heat generated by Bitcoin mining or using methane from landfills to produce energy.
“These projects, while good publicity because of their environmental benefits, are simply too small to have a significant impact on Marathon’s top line.”
Value Kicker, financial analysts.
Marathon’s path appears to be artificial intelligence
The most interesting turn Marathon can take is its foray into artificial intelligence (AI), explains Value Kicker.
Demand for AI data centers is booming, and Marathon has taken steps to enter this market. The company has incorporated two experts in AI, Janet George and Barbara Humpton, to its board of directors, suggesting clear interest in this field.
Additionally, the company’s cooling technology supports the power requirements of AI data centerswhich could facilitate a transition towards this market.
Having that in common, AI companies could partner with Bitcoin miners to use their already existing facilities. That is, use all the infrastructure, networks, labor and cooling of Bitcoin mining to reconvert them with AI servers. This could bring benefits to both industries.
Several companies in the Bitcoin mining industry, such as Core Scientific, Tera Wulf and Iris Energy, They are already taking advantage of their mining infrastructure to venture into AIwhich has boosted their market valuations over the past 12 months, as seen in the chart below.
On the other hand, in that same period, the actions of BTC mining companies that have not yet announced or mobilized their insertion into the AI industry have been in decline, as is the case with Marathon.
Future prospects for Marathon
Value Kicker debates whether to rate Marathon as a “hold” or a “buy.”
Finally, opts for a speculative “buy” rating, based on the various opportunities the company has to be successful in the future.
The combination of its foray into AI and cost-cutting measures could put Marathon in a stronger position. The company’s future will depend on how well it can execute these strategies in the coming months.
Clarification: This article is written for informational purposes, to report the opinion of Value Kicker. It does not constitute an investment recommendation or financial advice.
