One of the standouts of today's afternoon trading session has been Marathon Digital, which logged a -5.8% drop and underperformed the S&P 500 by -6.0%. The Data Processing Services stock is now trading at $9.49 per share and is -33.6% below its average target price of $14.3. Analysts have set target prices ranging from $8.0 to 20.0 dollars per share, and have given the stock an average rating of buy.
The market, on the other hand, is a bit more pessimistic. Marathon Digital's short interest -- meaning the percentage of its share float that is being shorted on an expectation of a price decline -- is quite high at 25.7%. The float includes only shares that are available for public trading, and excludes preferred shares.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.
For what it's worth, institutions own 31.1% of Marathon Digital's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.
To sum up, Marathon Digital is probably the subject of mixed market sentiment because of an analyst consensus of strong upside potential, a buy rating, an unusually large proportion of its shares sold short, and only a small number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about MARA:
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The stock has trailing 12 month earnings per share (EPS) of $-6.56
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Marathon Digital has a trailing 12 month Price to Earnings (P/E) ratio of -1.4 compared to the S&P 500 average of 15.97
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The company has a Price to Book (P/B) ratio of 2.91 in contrast to the S&P 500's average ratio of 2.95
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Marathon Digital is a Technology company, and the sector average P/E and P/B ratios are 27.16 and 6.23 respectively
