ANKARA, TURKIYE – NOVEMBER 23: Bitcoin cryptocurrency is displayed in this photo illustration. [+] Ankara, Turkiye, November 23, 2024. (Photo by: Mustafa Ciftci/Anadolu, Getty Images)
Anadolu (via Getty Images)
Shares of Bitcoin mining company MARA Holdings (NASDAQ: MARA) are up nearly 40% in one month. The company's mining capacity is increasing, and rising Bitcoin prices are driving the stock price higher. Additionally, the company successfully issued $1 billion in convertible debt last month. Looking at the longer term, MARA's stock price has risen an astonishing 700% from the $3 level in early 2023 to $27 today. This may be due to the following:
The company's P/S ratio increased by 266% from 3.6x in 2022 to 13.3x currently. Revenue increased 380% from $118 million in 2021 to $565 million now. This was partially offset by the company issuing more shares, increasing its total number of shares by 122% to 279 million shares.
What is driving MARA's revenue growth?
MARA Holdings' earnings growth in recent years has been driven by increased mining capacity. The company's hash rate capability (the number of cryptographic hash algorithms solved per second) has skyrocketed from 7.0 exahashes per second to 25.2 in 2023 and now even more to 36.9. MARA currently has 26,747 Bitcoins on its balance sheet.
2022 was a bad year for cryptocurrencies, with Bitcoin falling below $17,000 by the end of the year. However, it quickly rebounded to over $42,000 by the end of 2023. And this year has been a remarkable year for cryptocurrencies, with BTC currently surging to levels above $96,000. This growth was fueled by regulatory approval for a Bitcoin exchange-traded fund earlier this year. But more importantly, recent investor optimism has been fueled by Donald Trump's victory in the US presidential election. During his campaign, Trump called for the United States to become the crypto capital of the world. The new government is expected to reduce regulations on cryptocurrencies, resulting in increased adoption of cryptocurrencies.
Is there room for growth in MARA stock?
While MARA has outperformed the broader market in recent years, its gains have been far from consistent and its annual returns have been much more volatile than the S&P 500. MARA stock returned 215% in 2021, -90% in 2022, and 587. In contrast, Trefis' high-quality portfolio, which includes a collection of 30 stocks, has significantly lower volatility. And it has outperformed the S&P 500 every year over the same period. why is that? As a group, Headquarters portfolio stocks carried less risk and delivered better returns compared to the benchmark index. It's not been a rollercoaster ride, as evidenced by the performance metrics of our corporate portfolio.
Given the current uncertain macroeconomic environment surrounding rate cuts and multiple wars, could MARA face a similar situation in 2022 and underperform the S&P over the next 12 months? Or significantly? Could it go up? Considering the increasing mining capacity and rising Bitcoin price, we think MARA stock has room for further growth going forward. Additionally, MARA stock trades at a lower valuation multiple of 8x trailing earnings, compared to an average P/S multiple of 13x over the past three years. MARA Holdings' valuation ratio dashboard has more details.
While MARA's share price looks like it has potential for even higher levels, it's useful to see how MARA's peers are faring when it comes to important metrics. At Peer Comparisons, you can find other valuable comparisons of companies from different industries.
Comparison of MARA returns and Trefis enhanced portfolio
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