MARA Holdings Cut to Sell at Compass Point Ahead of Earnings, Citing Cash Burn

Investment slope Compass Point downgraded MARA Holdings (MARA) to a merchantability standing from neutral connected Tuesday, citing unsustainable currency burn.

“There's amended ways to get BTC beta,” analysts wrote successful the probe note, pointing to Marathon’s hash price, present beneath 5.5 cents, arsenic a awesome of declining profitability. At existent operational levels, Compass Point estimates the institution is facing important currency pain that could pb to shareholder dilution.

The slope besides slashed MARA's terms people to $9.50 from $25, suggesting much than 25% downside from the existent terms adjacent $13.

Marathon’s concern relies connected bitcoin mining, a process that earns BTC successful speech for computing power. However, arsenic mining rewards shrink and vigor costs persist, the economics of the concern exemplary person travel nether pressure. Meanwhile, Compass Point argues that Marathon trades astatine a premium to the terms of bitcoin itself—an unfavorable setup for investors seeking vulnerability to the asset.

The downgrade besides comes amid a broader slump successful high-performance computing (HPC) and AI infrastructure plays. Peer companies Core Scientific (CORZ) and TeraWulf (WULF) person besides underperformed year-to-date arsenic capitalist enthusiasm astir AI has cooled. Concerns implicit lawsuit concentration, pricing risks, and slowed superior expenditures from giants similar Microsoft person dragged valuations down, with HPC assemblage multiples dropping from arsenic precocious arsenic 15x past twelvemonth to astir 5x currently.

Still, Compass Point noted imaginable tailwinds for the assemblage successful the agelong run, including rising request for AI infrastructure and capex commitments from unreality providers. But for now, they reason Marathon’s fundamentals stay excessively anemic to warrant its marketplace valuation.

MARA is reporting net connected May 8, post-market. The banal fell 25% this year, portion a bitcoin mining ETF, WGMI, fell 37%.

UPDATE (May 6, 16:27 UTC): Updates headlines and adds MARA's net time.

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