MARA Holdings Downgraded to Sell by Compass Point, Foreseeable Cash Burn Forthcoming

Key Updates:

Compass Point has issued a sell rating for Marathon Digital stock, lowering its price target from $25 to $9.50.
The firm cites unsustainable cash burn and impending dilution, cautioning that Marathon’s price is currently above the market average for bitcoin.
Broader weaknesses noted in the High-Performance Computing (HPC) sector as AI-driven stock preferences have shifted.

Overview:

Investment bank Compass Point downgraded MARA Holdings (MARA) to a sell rating on Tuesday, highlighting the company’s unsustainable cash burn. Their analysts remarked, “Better options exist to gain BTC exposure,” suggesting that Marathon’s hash price is now under 5.5 cents, indicating a drop in profitability.

The downgrade comes as Compass Point predicts potential cash burn risks that could dilute shareholder value.

The bank’s report also estimates that MARA’s outlook for returns is unfavorable amid a slump in HPC and AI infrastructure markets, as competitors like Core Scientific (CORZ) and TeraWulf (WULF) have struggled in recent months.

Despite the challenges, Compass Point sees possible long-term growth due to rising demand for AI infrastructure but believes that the current state of Marathon’s fundamentals renders it an unattractive investment choice.

MARA’s earnings report is due on May 8, with the stock having dropped 25% this year, while a bitcoin mining ETF named WGMI fell by 37%.