Should you buy or sell Marathon Digital shares after beating Q2 earnings expectations?

Marathon Digital Holdings Inc. (NASDAQ:MARA) shares edged slightly lower after announcing its most recent quarterly results on Friday. The company reported mixed fiscal Q2 results before markets opened, beating analyst expectations on non-GAAP EPS but missing on the GAAP basis. In addition, revenue for the quarter came below expectations despite growing by more than 10,000%

Marathon Digital posted Q2 non-GAAP EPS of $0.21, slightly outperforming expectations by $0.03 per share. However, its GAAP EPS of -$1.09 missed by a whopping $1.27. On the other hand, its revenue of $29.32 million was short of expectations by $5.05 million.

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Marathon Digital increased its bitcoin holdings to approximately 5,784, including 4,813 bitcoins it purchased at an average price of $31,168.

Should you invest in Marathon Digital shares in Q3 2021?

Although Marathon Digital shares have pulled back more than 40% since 5th April, the stock is still up more than 200% this year, pushing the P/E ratio to 55.41. Therefore, value investors may find the MARA stock unattractive at the current valuation multiple.

However, when we factor in this year’s earnings growth of more than 75% and next year’s equivalent of more than 40%, the stock traded at a forward P/E ratio of just 11.92, suggesting a potential case of undervaluation.

Furthermore, analysts expect MARA earnings per share to grow at an average rate of 50% over the next five years, making it an attractive option for growth investors. Therefore, MARA seems to have several catalysts lined up to boost the stock price ahead of a potential rally in the bitcoin price. As such, the April to August pullback could be an opportunity to buy.

MARA stock price forecast for August 2021

Technically, Marathon Digital shares seem to have recently pulled back after hitting the trendline resistance in the ascending channel. However, the stock is yet to cross below the 100-day moving average, which could provide significant support for a rebound.

Therefore, investors can target potential rebound profits at approximately $37.84 or higher at $43.44, while the critical support levels are $28.74 and $23.18. The MARA stock traded at $33.49 at the time of writing.

The case for buying Marathon Digital shares now

Although Marathon Digital delivered a mixed quarterly report, the company’s growth prospects are exciting. Its forward P/E ratio of just 11.92 is compelling, while its PEG ratio of 1.12 will attract growth investors.

Therefore, the recent pullback creates a perfect opportunity to buy MARA shares before embarking on a rally.

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