Cryptocurrencies are still facing a myriad of issues. For one, the value of most cryptos are still hovering around 52-week lows. Two, the Biden Administration is looking to regulate the sector intensively. Three, there are concerns about the impact Bitcoin (CCC:BTC-USD) miners are having on the climate. I also believe the chances of crypto mining being greatly curbed or even banned in the U.S. are quite high. Given all of these points, I view crypto miners as being among the most important IT stocks to sell.
Here’s more information about the three IT stocks to sell that I’ve identified.
|HUT||Hut 8 Mining||$1.93|
Marathon Digital (MARA)
Marathon Digital (NASDAQ:MARA) focuses on mining Bitcoin. In addition to being badly hurt by the falling price of Bitcoin, the company’s second-quarter results were negatively impacted by rising electricity prices and higher energy costs. Unfortunately, rising costs and falling revenue are not a formula for success for any company.
Given the obstacles that Marathon is facing, it’s not surprising that last quarter, its top line dropped to $24.9 million from $29.3 million during the same period a year earlier, while its gross profit tumbled to just $8.2 million from $25.3 million in Q2 of 2021. Further, Marathon reported an operating loss of of $156.7 million last quarter.
With the Federal Reserve continuing to tighten monetary policy, Bitcoin’s value is likely to remain depressed for some time. Meanwhile, regulators are looking to crack down on cryptos in general and bitcoin mining in particular, creating big risks for Marathon and the owners of MARA stock.
Finally, as of the end of Q2, the company had just $86.5 million of cash, meaning that it will, likely, relatively soon, either have to take out loans at relatively high interest rates, sell more MARA stock at relatively low prices, sell off limited assets, or declare bankruptcy. Those are some of the top reasons MARA makes the list of IT stocks to sell.
Hut 8 Mining (HUT)
At the moment, Hut 8 Mining also faces plenty of regulatory risk. That’s partly because Canada reportedly has a “stringent regulatory environment” for cryptocurrencies in general.
In addition, according to Time Magazine contributor Laura Millan Lombrana, “Bitcoin mining’s climate impact is comparable to farming cattle or burning gasoline when taken as a proportion of market value, according to researchers at the University of New Mexico in Albuquerque.”
On the financial front, Hut 8’s results are deteriorating. In its second quarter, the company’s revenue jumped to $43.8 million from $33.5 million, year over year. However, it generated a gross profit of negative $3.8 million, as compared to a profit of $16.97 million in Q2 of 2021. On the balance sheet, Hut 8 had $60.1 million in cash and equivalents at the end of last quarter, down from $140 million in Q2 of 2021. Like MARA, HUT is another top IT stock to sell.
Aside from the Bitcoin miners, another IT stock to sell is DocuSign (NASDAQ:DOCU).
Morgan Stanley (NYSE:MS) analyst Josh Baer warned that, “intensifying competition and commoditization of the company’s core digital signature capabilities” would negatively impact DOCU, leading to “pricing pressures,” as reported by Barron’s. The analyst also noted that DOCU is encountering “demand normalization” in the wake of the pandemic.
“Further out, he sees intensifying competition and commoditization of the company’s core digital signature capabilities, leading to pricing pressure,” notes Barron’s contributor Eric J. Savitz.
In addition, DocuSign reported an operating loss of $39 million for last quarter, much worse than its operating loss of $18.7 million during the same period a year earlier.
Although DOCU’s cash and equivalents last quarter came in at $637.2 million, up from $518.6 million during the same period a year earlier, it has $854.6 million of debt. Additionally, it relies a great deal on stock-based compensation to pay its employees, shelling out $141.2 million of DOCU stock for compensation purposes last quarter.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.