Compass Point has downgraded MARA Holdings (MARA) to Sell, citing cash burn and concerns over its increasing debt load ahead of the company’s upcoming earnings report set for May 8.
In a note to investors, Compass Point highlighted that Marathon Digital is facing significant challenges due to rising operational costs and declining bitcoin prices, which have eroded the company’s profit margins. Despite aggressive expansion plans, the firm is struggling to generate positive cash flow, leaving it dependent on debt financing to continue operations.
The analysts at Compass Point expressed concerns that the high cost of mining coupled with the volatility in bitcoin prices could force MARA into a dilution scenario if the company needs to raise more capital to cover its growing losses. They also pointed out that the company’s reliance on debt issuance could lead to increased financial pressure in the near future.
Although MARA has previously seen strong growth, the firm’s dependence on bitcoin mining and the unpredictable nature of the cryptocurrency market have raised red flags. The downgrade comes amidst a 20% decline in the company’s stock this year, reflecting broader challenges in the crypto mining industry.
