Jefferies Downgrades Bitcoin Miner Marathon Digital on Construction Delays

Investment bank Jefferies downgraded its rating for bitcoin (BTC) miner Marathon Digital Holdings (MARA) to "hold" from "buy" due to construction delays.

"Worsened mining economics and a lack of transparency around the execution risks for MARA's hosting partners keep us on the sidelines for now," Jonathan Petersen and Amanda Santillo wrote in a note to investors published on Sunday. The bank also lowered its price target to $4 from $12.5.

Marathon operates an asset-light model; it only owns the mining machines and relies on counterparties to host them in purpose-built infrastructure. But its counterparties have faced significant construction delays, meaning Marathon's investment won't be generating revenue for a while.

Jefferies expects all of Marathon's ordered machines, which total 23 exahash/second (EH/s) of computing power, to be running at the end of 2023, instead of the company's projected mid-year.

Shares of Marathon Digital were up over 3% at $4.23 in pre-market trading, along with the broader crypto market.

Marathon missed its 9 EH/s hashrate target for the end of 2022, because 2.1 EH/s of computers are awaiting energization at Applied Digital's (APLD) Texas hosting site, who is in turn waiting for regulatory approval to turn on the machines. The miner had already lowered its target for the year from 11.5 EH/s in its third quarter earnings report.

On top of that, Marathon has been negatively impacted by power curtailment on King Mountain site in Texas, Jefferies said.

Last week, Marathon paid off $30 million in a revolving credit facility from troubled crypto-friendly Silvergate Bank (SI).

Read more: Bitcoin Miners Got Crushed by Crypto Winter. 2023 May Bring More Pain