Many of the heavily shorted cryptocurrency stocks rallied Wednesday, posting massive double-digit gains. However, it may still be too early to invest in this space, and some crypto stocks are more attractive than others. In this article, we compared two Bitcoin mining stocks to see which one is better. Marathon Digital Holdings (NASDAQ: MARA) rose about 24% yesterday, while Riot Blockchain (NASDAQ: Riotannounced a name change to Riot Platforms) rose 15%. However, Bitcoin (BTC-US Dollar) prices have barely moved and the lack of major news moving bitcoin mining stocks shows why investors are hesitant before buying those stocks. And it seems.
Marathon Digital Holdings (MARA)
Marathon Digital is up 14% year-to-date after jumping 24% yesterday. This is because the sudden and dramatic increase in risk-on sentiment has benefited many crypto stocks that have been heavily shorted. However, a closer look suggests that a bearish view may be appropriate.
Investor reflection began today as the market began to unwind the surge that poured into crypto stocks the previous day, with Marathon Digital down more than 7%. The lack of company-specific news demonstrates the dangers of investing in stocks like Marathon Digital.
Neither Marathon nor Riot are profitable, but Marathon seems to have more problems. The company reports his $150.5 million in 2021 revenue and $150 million in the last 12 months. Although net losses narrowed from 2017 to 2019, net losses have increased since 2020, ballooning to $268.5 million over the last 12 months.
Marathon Digital has a debt/equity ratio of 106.6%, with assets of $1.5 billion and total liabilities of $850.7 million as of the most recent report. The company also said he had $492.3 million in cash and short-term investments at the end of 2021, down from $55.3 million in the last 12 months.
One of the things that makes Marathon Digital different from other Bitcoin miners is its asset-light model. However, one of the major issues they face is the bankruptcy filing of their largest hosting partner, increasing the risk of MARA shares.
After setting a new quarterly production record by producing 4,144 Bitcoins in 2022, the company has 12,232 BTC on its balance sheet.
It’s also worth noting that approximately 42% of Marathon Digital’s stock has been short-sold.
What is your target price for MARA stock?
Marathon Digital has a Medium Purchase Consensus Rating based on 2 assigned purchases, 1 pending rating, and 0 sales ratings in the last 3 months. Marathon Digital Holdings’ average price target of $16.33 suggests a potential upside of 317.65%.
Riot Blockchain (RIOT)
Riot Blockchain is clearly in a better position than Marathon. For one thing, Riot spent only $11,020 on mining each coin in Q3, a gross profit of 61%. Marathon, on the other hand, was $33,691 per coin, with a gross margin of 36%. Riot is very dangerous, but takes a neutral view to emphasize its superiority over Marathon.
Riot posted a net loss of $373.2 million over the past 12 months, but its debt and equity positions are far superior to MARA’s 1.7%. The company had $257.1 million in cash and short-term investments, $1.45 billion in total assets and just $154.3 million in total liabilities as of the latest report.
Riot has not issued new debt in the last 12 months, while Marathon has issued $855.6 million and repaid only $77.5 million. In addition, Marathon’s free cash flow is almost twice as negative as Riot’s at -$591 million versus -$1 billion for Riot.
About 19% of Riot Blockchain shares have been sold short, so there could be a short sale there as well.
What is your target price for RIOT stock?
Riot Blockchain has a medium buy consensus rating based on 8 buys, 0 holds, and 0 sells assigned in the last 3 months. At $10.79, Riot Blockchain’s average price target implies a 155.69% upside potential.
Bottom Line: MARA Bearish, RIOT Neutral
Unfortunately, now is not a great time to invest in bitcoin miners due to skyrocketing energy prices and a sharp drop in bitcoin prices. However, with significantly less debt, a much lower price per coin mined, and overall greater stability, Riot has a better chance of surviving the crypto winter than Marathon.
As a result, Riot has a neutral rating on Marathon’s bearish view.