Summary Consensus is looking for -$0.09 in GAAP earnings for Q1. Shares have plenty of momentum (buoyed by strong buying) going into the report. Earnings and cash flow are expected to be boosted this year due to significantly higher annual sales. Intro We recently wrote about Marathon Digital Holdings, Inc. ( MARA ) back in March post the company's full-year numbers when we stated that the growth potential of the Bitcoin (BTC-USD) miner continued to outweigh downside risks in the stock. The above premise has actually played itself out over the past six weeks, as shares have rallied over 21% whereas the S&P has only returned just over 4% over the same timeframe. In fact, if we look at the technical chart below, we see that shares of MARA managed to punch above overhead resistance (and the stock's respective 200-day moving average) in early April where these former resistance levels should now act as underside support (which is what we are seeing). Furthermore, buying volume has continued to remain very strong in MARA in recent weeks, demonstrating that investors continue to see more upside potential over downside risk in this play. MARA Technical Chart (StockCharts.com) Bitcoin Tailwind In our March commentary, we stated that if the relationship between the miner's profitability & valuation could continue to improve in upcoming quarters, then downside risk would continue to decline and that is what appears to be playing itself out here. Obviously, a rising Bitcoin price would also play into MARA's bullish picture and this is what we have seen with Bitcoin up well over 4% over the past six weeks alone. MARA announces its fiscal first-quarter earnings numbers on the 9th of May next, where the bottom-line GAAP estimate comes in at -$0.09 per share. Although expected bottom-line profitability remains in negative territory, earnings revisions in MARA continue to be dialed up, resulting in actual positive expected GAAP numbers in the final two quarters of this year. Hash/Rate Growth Trends in Marathon 's recent March & April numbers speak to this improving profitability, where we witnessed the operational hash/rate continue its rise (now 14 EH/s) and the installed hash/rate climb to 17.9 exahashes by the end of April. These trends led to over a 40% spike in Bitcoin production in the first quarter alone, followed by the production of a further 700+ Bitcoin in the month of April. Therefore, with hash/rates increasing & with immersion mining now gaining traction which will result in better optimization, operational momentum is expected to continue for the remainder of the year. Suffice it to say, if these trends can indeed continue, management should be able to tackle the debt load more aggressively on the balance sheet, whilst also increasing its holdings (growing equity) over time. Bears may continue to point to the sky-high short-interest ratio as well as the bloated share count, but the risk here (from a bearish standpoint) is not to take into account the growth expectations this year which continue to impress. The almost $420 million in expected top-line sales for fiscal 2023 if met would be a 257% increase over fiscal 2022. In fact, if current trends continue (Where top-line revisions are being dialed up), a higher top-line number is the most likely outcome. Furthermore, the $0.09 EPS expectation for Q1 (if indeed met) will lead the way to positive profitability this year. Although the full-year bottom-line GAAP estimate of $0.10 per share will not turn many heads, growth stocks invariably seem to find a new lease of life when they finally can turn a profit. Furthermore, a return to strong cash-flow generation this year (forward P/C of 8.68) is a positive step in improving optimization and increasing that exahashes number as quickly as possible. Q1 Earnings Bears should not overlook these trends in that the longer and higher earnings and especially cash-flow numbers can remain elevated, the stronger the likelihood that both forward sales and earnings estimates will continue to be dialed up over time. For example, if we were to go to MARA's implied volatility chart as we can see below, we can see that the stock's IV currently comes in at approximately 122% in the forward month. Although we expect to see this number increase as we approach MARA's upcoming Q1 earnings announcement (expected on the 9th of May) and plenty of option skew continues to present itself on the call side (upside fear), IV is still trending lower than usual which points to the continuation of the trend in motion (bullish). MARA Implied Volatility Chart (MARA IV) Conclusion Marathon Digital Holdings is expected to announce its fiscal first quarter numbers on the 9th of this month where -$0.09 in GAAP earnings is the expectation for the quarter. However, as we have seen before, the market will be more in tune with how the miner's fundamentals will have changed during the quarter, which in turn will enable investors to size up MARA's growth potential once more. We look forward to continued coverage.
