Why Is The Market Sleeping On MARA Holdings?

Summary The market undervalues MARA’s mining business, which I estimate is worth 7–10x more than the current $1.09B premium over its Bitcoin holdings, implying 2–3x upside for the stock. Today, I ask myself: what is the market seeing in MARA to assign it such a depressed valuation? Should Bitcoin bulls consider entering MARA? I think so. The answers to my question include ongoing shareholder dilution, lack of profitability, and Bitcoin’s relative immaturity, making the company suitable only for dedicated Bitcoin bulls. I reiterate my ‘Strong Buy’ rating, as MARA offers leveraged exposure to Bitcoin with significant upside potential if the bullish scenario plays out. I covered MARA Holdings, Inc. ( MARA ) last time in March , arguing this was a deep value opportunity in the market. Since my last coverage, little has changed for the company or its valuation. What did change is Bitcoin’s price: at that time, it was just below $90,000? Today, at the time of writing, Bitcoin hit new ATHs at ~$123,000 before recently correcting to ~$116,000. MARA still sits below its recent, local ATH of December, and well below its ATH of 2020. In this article, I first review my bullish case to assess its validity, and then I ask myself a question: what is the market seeing in MARA to assign it such a depressed valuation? In other terms, what is the market “scared of” when it comes to this company? And when will it wake up to MARA’s valuation? Reviewing My Bullish Case With Updated Figures MARA holds 47,531 Bitcoins as of the time of Q1 earnings . That amount is worth ~$5.51 Billion at the time of writing. The Market capitalization of Marathon Holdings is around ~$6.6 Billion at the time of writing. That represents a 19% “premium” on mere Bitcoin holdings. I find this premium more than reasonable. It is actually not a premium, but the price that investors pay to purchase the whole Bitcoin mining business of MARA. In this regard, the question potential investors should ask themselves is whether MARA’s mining business is worth $1.09 Billion (the difference between MARA’s valuation and its BTC holdings). That’s what I will cover next. What Are You Buying for a $1.09 Billion “Premium”? In my previous articles on MARA, I took an educated guess regarding how much MARA’s mining business is worth, based on its projected future Bitcoin mined. I am reporting below my assumptions from previous work, and invite readers to go through my articles should they want to deep dive into the calculations and rationale. I expect MARA to produce ~27,000 Bitcoins until the 2028 halving (20 BTC per day, multiplied by 1349 days until mid-April 2028). I then expect the company to produce ~16,000, ~9700, ~ 5700, ~3500, and ~2100 Bitcoins for the following five halvings (ending in 2048). The total [is] 64,000 Bitcoins. At current market prices [NDR: Prices from March 2025], 64,000 Bitcoins are worth $5.7 Billion. Given my Bitcoin valuation model has an expected value between $112,500 and $200,000 per coin, I would assign the value of these Bitcoins at between $7.2 Billion and $12.8 Billion. Should Bitcoin mature into a global reserve asset, matching gold’s market capitalization at roughly $750,000 per coin, these Bitcoins would be worth $48 Billion. Note that today, at current market prices, 64,000 Bitcoins are actually worth $7.5 Billion. In other words, investors today are paying little more than $1 Billion for a mining business that is expected to generate at the very least 7 times worth that amount in Bitcoin at current market prices. Of course, this is not net profit and MARA still will have to cover for expenses after mining that Bitcoin over 3 decades of time. Depending on what exact price Bitcoin goes to and in what time frame, this business could potentially be worth tens of billions of dollars. In my last article , I did estimate a long term 30% net profit margin for MARA, based on a $200,000 average Bitcoin price and an implied value of the mining business of ~$11 Billion. I think these valuations are somewhat conservative, as I do not see a scenario where Bitcoin matures “just” to an average of $200,000 per coin long term. An investment in MARA remains a bet on Bitcoin maturing as a global reserve asset and reaching levels far higher than those. For the sake of this analysis and simplicity, I assume that MARA’s Bitcoin mining operations are worth between 7 and 10 times the $1.09 Billion the market assigns to them. What is the Market Scared of? I am a firm believer in the theory of market efficiency. When I consider investing in single stocks, I always try to understand what the market is seeing in a ticker to justify a certain valuation. In that regard, I disagree with some analysts’ approach to consider a stock “cheap” just because it is in historical terms or relative to industry P/E ratios. When it comes to MARA, the stock has been trading at what I consider suppressed valuations for a long time. I think that’s a function of three elements: MARA’s current lack of profitability MARA’s shareholder dilution The relative immaturity of Bitcoin, today Market Concern #1: Profitability For what concerns the first element, it is important to understand that MARA Holdings does not sell the Bitcoin it mines to finance its operations. That’s because the company adopts a “HODL” strategy and considers itself a Bitcoin Treasury company. MARA partially moved away from fiat currency metrics (for example, it no longer reported the cost of electricity to mine 1 BTC in Q1) and decided to focus on metrics such as BTC yield per share, reported in Q1 earnings (see below). MARA key figures, Q1 (MARA Holdings) In my previous work, I estimated the price of Bitcoin that would make MARA theoretically profitable, if the company were to rely on selling its Bitcoin to finance itself. These estimates, which were used also by a fellow MARA analyst , are based on 2024 data. I cannot update these figures on Q1 metrics because, as mentioned, MARA slightly changed their reporting, including not releasing exact total mining cost or their electricity cost. I may decide to update these estimates based on those figures that are still available from MARA’s income statement in the upcoming quarters. My assessment is that MARA would be profitable at the following BTC price levels: At $52,156 per coin, accounting only for mining costs. At $107,209 per coin, accounting for cost of revenue. At ~$140,000 per coin, accounting for all expenses. With Bitcoin at above $110,000 per coin at this time, we are not far from the levels that would allow MARA to decide to start selling Bitcoin to finance its operations and breakeven. Note that these figures assume the number of Bitcoin MARA mined in Q4, which is part of the current halving cycle. Future halving cycles (with the next expected in 2028 ) will reduce the number of Bitcoin MARA can mine, and will therefore mathematically increase the theoretical profitability level of the company. Incidentally, this is also why the theoretical profitability of MARA is, in my view, kind of irrelevant for an investment thesis in MARA. The company is not planning to sell Bitcoin for the foreseeable future. Rather, it plans to hold it. This makes sense only in a bullish Bitcoin scenario, where Bitcoin does mature into a global reserve asset. In that context, MARA will cover expenses either by realizing some of its significant capital gains or by monetizing Bitcoin (for example, by issuing loans against it or offering financial products tied to it). This is a similar approach to what Strategy ( MSTR ) has adopted. Market Concern #2: Shareholders Dilution Shareholders dilution is a valid market concern, in my view. No matter the long-term plans of MARA, bills need to be paid every day. MARA has effectively incurred shareholder dilution to finance its operations for a while now. Shares outstanding have been on a steady rise, growing more than 10X from 2020 to today, as the chart below shows. MARA, Shares outstanding (CompaniesMarketCap) Most dilution took place in 2020, when MARA grew share count by almost 400%, taking profit from the Bitcoin bull market and related euphoria at that time. In the last four years, shares issuance has ranged between 5% and ~25% on a quarterly basis. MARA has less than $200 Million in cash as of the last report (Seeking Alpha data). Given how the company lost $330 Million in TTM (Net Income data, Seeking Alpha), I expect dilution to continue for the foreseeable future. This is a factually strong headwind for MARA’s price, as the stock has to appreciate by 15% to 100%+ per year just to “breakeven” with shares dilution. While that would normally be crippling for a company relying on a traditional business model, I don’t see this as a dealbreaker for MARA. I will cover exactly why next. Market Concern #3: Bitcoin’s Immaturity (When Will the Market Wake Up?) A Bitcoin “HOLD” strategy only makes sense if Bitcoin grows into a global reserve currency and then keeps appreciating at a reasonable CAGR, in line with what is expected from a reserve asset. Said CAGR should be higher than MARA’s needed long-term shareholder dilution (which I described previously) for the whole ordeal to be sustainable. In other words, an investment in MARA Holdings makes sense only in a bullish Bitcoin scenario. Bitcoin is still relatively immature, even net of the launch of Bitcoin ETFs and a more accommodating regulatory framework, at least in the US. In this context, I find it reasonable that the market does not assign a premium valuation for MARA, but rather a discounted one. As the company is not (even theoretically) profitable, a permanent Bitcoin crash would prove potentially fatal for MARA. After all, the entire business is about mining and holding Bitcoin. When will the market “wake up” on MARA’s valuation? I obviously do not have an exact answer or timeline, but I think it will inevitably happen as (if) Bitcoin’s price continues rising. The more the market is convinced about Bitcoin’s validity as a global reserve asset, the more attractive MARA’s business model will be to market makers. This ‘maturity’ has already taken place, at least partially, for other crypto related tickers. It is the case of Michael Saylor’s company, Strategy, as well as Coinbase ( COIN ) and IREN Limited ( IREN ), another miner. These companies all trade at relatively premium valuations. For example, MSTR trades at ~1.8X times its Bitcoin holdings, despite not having a mining business and only having a declining legacy software business. Risks As I repeated numerous times, investing in MARA only makes sense in the context of a protracted Bitcoin bull run and bullish investment thesis. This is the main risk of investing in a Bitcoin proxy that the market has not yet assessed properly. Any investors who are skeptical about Bitcoin and do not believe in a long term bullish case should steer clear of this company, in my view. I touched other risks linked to an investment in MARA in the previous sections. All the three elements that the market is concerned about MARA, also represent risks. The company’s lack of profitability and dependence on shareholders’ dilution may limit upside for the foreseeable future. And the fact that Bitcoin may take time to mature, even in a bullish scenario, may mean that MARA’s valuation could stay depressed for long. Conclusion: Why Invest in MARA? For me, investing in MARA is an interesting proposition because I think the market is severely overestimating the value of the company’s Bitcoin mining business. I think this business, valued at roughly $1.09 Billion at the time of writing, is worth between 7X and 10X times (or more) that amount. This means an extra $8 to $12 Billion in market cap for the company, which represents a 2X to 3X upside from current price levels. On top of that, investors are also exposed to a (supposedly) appreciating Bitcoin stack, which will also appreciate 1:1 with Bitcoin in a bullish scenario. To be clear – if MARA’s mining business was fairly valued today, I would not be recommending a BUY. I would prefer to simply buy and hold Bitcoin myself. That’s because MARA’s mining business, despite being in my view undervalued, is also a non-profitable business that relies on shareholders’ dilution to survive. This is also the reason why I recently turned neutral on MSTR – as I do not see any significant activity to justify a premium in that company, contrary to here. I re-iterate my STRONG BUY rating for MARA because I see it as an asymmetric, leveraged bet on Bitcoin. Investors can see significant upside between 7X and 10X current prices, in case of a moderate Bitcoin bull scenario. In an even more bullish scenario, where Bitcoin matures and reaches $750,000 per coin (my bullish target ), upside may be even greater. It is a bet that only Bitcoin bulls should consider taking, and a highly volatile investment.

Source: Seeking Alpha