According to a report, Jefferies, a well-known investment bank, has decided to change its rating for Marathon Digital Holdings (MARA), a company specializing in bitcoin (BTC) mining, from “buy” to “hold” due to construction delays.
In a memo to investors released on Sunday, bank analysts Jonathan Petersen and Amanda Santillo explained that the downgrade was prompted by the “worsened mining economics” and a lack of transparency surrounding the execution risks faced by MARA’s hosting partners.
The analysts stated that they are taking a cautious approach toward MARA due to these concerns. As a result of these factors, Jefferies also lowered its price target for MARA from $12.5 to $4.
Marathon Digital Holdings operates on an asset-light business model, meaning that the company only owns the mining machines and relies on other parties to provide the necessary infrastructure for hosting them.
However, these hosting partners have recently experienced delays in construction, resulting in a delay in generating revenue for Marathon’s investments. As a result, the company’s mining operations will not produce income as anticipated.
Jefferies predicts that all of Marathon’s 23 exahash/second (EH/s) of ordered computing machines will be operational by the end of 2023, rather than the mid-year timeline that the company had projected.
Marathon fell short of its 9 EH/s hash rate goal for the end of 2022 because 2.1 EH/s of computers at Applied Digital’s hosting site in Texas are still waiting to be energized due to regulatory approval issues.
In its third-quarter earnings report, the miner had already revised its target for the year down from 11.5 EH/s. As a result of these setbacks, Marathon did not meet its original target for the end of 2022.
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