Marathon Digital transformed from a tiny patent holding company into the world's largest publicly traded Bitcoin miner over the past six years. It was mining an average of 19.7 Bitcoins per day at the end of June with an operational hash rate of 26.3 exahashes per second (EH/s). Its closest competitor, Riot Platforms, only mined an average of 8.5 Bitcoins per day in June, with an operational hash rate of 11.4 EH/s.
From 2023 to 2026, analysts expect Marathon's revenue to grow at a compound annual growth rate (CAGR) of 37% as it opens more mining facilities and acquires its smaller competitors. They expect its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to rise at a CAGR of 5% -- even as energy costs rise and Bitcoin's recent halving reduces the rewards for mining the world's top cryptocurrency.
Image source: Getty Images.
Marathon's outlook is promising, and its stock doesn't seem too expensive at 8 times this year's sales. But could its smaller competitor Bit Digital (BTBT +4.20%) generate even bigger gains over the next few years?
A brief history of Bit Digital
Bit Digital went public as a peer-to-peer lending company in March 2018. But it suspended that business in October 2019, bought thousands of miners, and started to mine Bitcoin and Ethereum (ETH +6.69%) in February 2020.
Bit Digital initially operated mining facilities in the U.S. and China, but it left China in 2021 amid its regulatory crackdown on the cryptocurrency market. It also shipped some of its miners to Iceland and Canada for more favorable tax rates. It stopped mining Ether after it transitioned from the energy-intensive proof of work (PoW) mining method to the more energy-efficient proof of stake (PoS) in 2022, but it continues to stake (or lock up) its Ether tokens to generate revenue.
|
Metric |
2020 |
2021 |
2022 |
2023 |
|---|---|---|---|---|
|
Bitcoin miners |
40,865 |
27,744 |
37,676 |
46,548 |
|
Total hash rate |
2.3 EH/s |
1.6 EH/s |
2.6 EH/s |
3.9 EH/s |
|
Bitcoins received* |
1,510.2 |
2,065.3 |
1,247.5 |
1,507.3 |
Data source: Bit Digital. *From its mining pool operators.
Bit Digital's fleet and hash rate shrank in 2021 and 2022 as it exited China and spread its miners across Canada and Iceland. It also still has a much smaller fleet than Marathon, which was operating over 250,000 miners at the end of June.
Its annual revenue more than doubled from 2020 to 2023, but it endured some wild swings with Bitcoin's price. It briefly turned profitable in 2021 as Bitcoin's price soared, but it dipped into the red again as energy costs rose in 2022 and 2023.
|
Metric |
2020 |
2021 |
2022 |
2023 |
|---|---|---|---|---|
|
Revenue |
$21 million |
$96 million |
$32 million |
$45 million |
|
Net loss |
($2 million) |
$5 million |
($105 million) |
($14 million) |
Data source: Bit Digital.
It's pivoting toward the AI market
Last October, Bit Digital purchased thousands of data center GPUs from Nvidia and launched a new AI business. CEO Sam Tabar said this new segment, which rents out its processing power for AI tasks, would help it weather "potential downturns" in its core Bitcoin mining and Ether staking businesses.
Bit Digital's hash rate declined to 2.6 EH/s at the end of June as it prioritized the expansion of its AI business, which was already generating revenue on 256 of its servers, over its deployment of new miners. It said its first AI contract had already generated $21.7 million in cumulative revenues in the first six months of the year.
As that new business expands and the Bitcoin market stabilizes, analysts expect its revenue to soar 187% to $129 million in 2024 and rise 34% to $173 million in 2025. They also expect it to turn profitable this year and stay in the black in 2025. Based on those expectations, Bit Digital's stock still looks cheap at 3 times this year's sales.
NASDAQ: BTBT
Key Data Points
Could Bit Digital become the next Marathon Digital?
Bit Digital doesn't aspire to become the "next Marathon Digital" in the Bitcoin mining market. Instead, it could gradually transition away from the Bitcoin mining and Ether staking markets as it expands its AI business. Therefore, Bit Digital isn't a great alternative to Marathon Digital for investors who want to focus on the Bitcoin mining market. But it might just be a compelling play for investors who want exposure to the Bitcoin, Ether, and AI markets in a single small-cap stock.
