Marathon Vs. Silvergate: Which Cryptocurrency Stock Is A Better Buy?

SI already has an enviable 33% profit margin. It has a strong balance sheet and ended Q1 with close to $4 billion in cash. SI is relatively small, with a market cap of just over $2 billion. Because its deposits have accelerated over the last year, it has a loan-to- deposit ratio of just 23%, which is among the lowest in the industry, giving it ample opportunity to increase its lending going ahead.

Currently SI is trading at a 13x forward price to sales multiple, which may look steep. However, Wall Street expects the company to increase its sales by 68% year-over-year in 2021, and by 40% in 2022. Its 32.6x price-to-earnings multiple is also attractive because analysts expect its EPS to rise by 82% in 2021 and 40% in 2022.

Silvergate stock is currently trading 54% below its record high. Despite the pullback, its shares have gained more than 550% since its IPO and might double again in the next year given consensus estimates.

Marathon Digital Holdings

In the first quarter, Marathon Digital Holdings reported $9.2 million of revenue, representing a 1,445% increase year over year. Comparatively, its net income stood at $83 million. The accounting rules for Bitcoin mining companies can be tricky because  they process related blockchain transactions and are rewarded by digital currencies for their efforts.

Marathon confirmed that it recognizes revenue based on the prices at which it receives Bitcoin. Because it had to update the prices of Bitcoin on its balance sheet, the company reported an unrealized $137 million gain in Q1 due to the digital asset’s rising prices. It also reported a $47 million operating loss in the quarter ending March 31.

Mining companies such as Marathon Digital need to keep improving their hash rate to allow them to mine Bitcoins at an incremental rate. Further, any increase in the price of Bitcoin will also push up the value of these assets held on the company’s balance sheet.

Due to the rapid rise of Bitcoin, shares of Marathon Digital have risen by 3,300% in the last year. But investors should also realize that the stock will grossly underperform the broader markets if/when the crypto market experiences a sell-off.

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