JonesResearch maintains HOLD rating on Bitcoin miner MARA amid shifts into AI services

Core Insights - Jones Research has maintained a 'Hold' rating for MARA, citing missed earnings expectations due to increased operating costs impacting margins [1] Financial Performance - MARA reported third-quarter revenue of $252.4 million, a 6% increase from the previous quarter, exceeding Jones Research's estimate of $246.1 million [2] - EBITDA for the quarter was $51.0 million, falling short of the projected $83.7 million, attributed to a 17.5% rise in general and administrative and research expenses to $57.9 million [2] - The gross margin was 42.5%, below the estimated 52.7%, due to higher-than-expected hash costs of $0.031 per terahash compared to the forecast of $0.027 [3] - Operating income showed a loss of $158.0 million, wider than the anticipated loss of $111.8 million [3] - Adjusted EBITDA was reported at $395.6 million, primarily due to a $343.1 million unrealized gain on bitcoin holdings [3] Future Projections - Jones Research has revised its 2025 and 2026 EBITDA estimates for MARA to $214 million and $376 million, respectively, down from previous forecasts of $269 million and $407 million [4] - The revision reflects higher operating costs and a lower projected hash price of $0.050 per terahash for the fourth quarter [4] Strategic Initiatives - MARA's acquisition of a 64% stake in French cloud operator Exaion and a partnership with MPLX LP are seen as critical to its new strategy [5] - Exaion is expected to enhance software and compliance capabilities, while the MPLX partnership will provide access to natural gas resources for powering modular data centers in the Delaware Basin, with initial capacity planned at 400 megawatts and potential expansion to 1.5 gigawatts [5] Market Competition - The first power plants under the MPLX partnership are not expected until 2027, with confirmation from MPLX's CEO that the project will not commence before 2026 [6] - The competition in the sovereign and private AI cloud market is intense, with major players like Amazon Web Services, Google Cloud, and Microsoft Azure expanding into compliant cloud services, alongside emerging firms like CoreWeave targeting regulated industries [6] Operational Flexibility - Despite the challenges, MARA's ability to transition between bitcoin mining and AI infrastructure, along with the potential to colocate data centers next to owned natural gas plants, offers some operational flexibility in executing its new strategy [7]