After an epic rally in May, should you buy Remark Holdings (NASDAQ:MARK)? Trading for less than 50 cents back in April, shares of MARK stock skyrocketed to as high as $3.56 a share on May 27, before cooling off in recent weeks. Right now, shares trade between $2 and $2.50 per share.
Last month’s extremely strong performance isn’t the first time this artificial intelligence play has been a “hot stock.” Back in late 2017 and early 2018, shares zoomed from $3.75 per share to prices as high as $15 per share. But, following this rapid rise, the stock cratered in the months that followed. By 2019, shares were trading for less than $1 per share.
So, will history repeat itself? That’s debatable. On one hand, you can argue today’s needle-mover is a much stronger catalyst than the garden variety ones that pushed shares higher in 2017/2018, before a short-seller called them out.
And what’s today’s catalyst? The company’s AI-powered thermal screening devices. Thermal screening is one of many tools that may help things get back to normal after the novel coronavirus. This technology could help ensure high-traffic businesses like airlines, casinos, restaurants and retail reopen, without causing a second wave of the pandemic.
On the other hand, the actual economic potential of Remark’s solution may be more hype than opportunity. Considering this company has rallied, then crashed, on the heels of speculation before, it may be too risky to jump into it now. Especially as prices remain far above their prior price levels.
Opportunity vs. Hype With MARK Stock
On paper, it seems Remark is in the right place, at the right time. Its thermal screening solution could be the best way for businesses to get back to full capacity, while minimizing the risk of a second wave.
But, will the company be able to capitalize on this opportunity? That remains questionable.
Granted, it received FCC approval for the device. And, as InvestorPlace’s Mark Hake noted June 17, the company added to its working capital. But as he pointed out, the means by which the company raised this capital could be a red flag with this stock.
To top it all off, its track record doesn’t inspire much confidence. Remark has a history of talking up its potential, then failing to deliver. As this commentator noted in 2018, the company at the time made similarly bold claims about growth prospects. But, results from later that year show us how far they missed the mark, so to speak.
Yet, while I’m skeptical that today’s hype is the real deal, I wouldn’t go short this stock right now. In today’s “Robinhood market,” stocks like this one could continue to climb higher in the near term.
Why Remark Could Remain Hot for Now
Looking into MARK stock, it seems as if this is a name that’s more likely to crash and burn than turn into a long-term compounder. Yet, current market conditions make going short on this stock highly risky.
Why? Chalk it up to the “Robinhood market.” What do I mean? With retail investors on the popular stock trading app driving speculation even in bankrupt stocks, “story stocks” like this one could head even higher. This could happen even on a tiny bit of positive news.
But that’s not all. There’s more to this company than its coronavirus catalyst. As InvestorPlace’s Larry Ramer discussed June 8, the company holds a 4.5% stake in healthcare technology startup Sharecare, which may soon go public.
Some have said Sharecare could be worth between $1 billion and $1.7 billion. In other words, Remark’s stake may be worth as much as $76.5 million Relative to its current market cap of about $239.5 million, that’s a nice chunk of change for a noncore asset.
However, don’t take either factor as a reason to buy. If the current hype behind Remark changes course, or if the company fails to realize a large return on the Sharecare investment, this stock could easily fall back to prior price levels.
Skip Out on Risky MARK Stock
In normal market conditions, Remark Holdings would be a great stock to short. With speculation instead of fundamentals driving its share price, the stock could easily crumble if reality fails to live up to the hype.
Yet, in today’s market, where even insolvent companies see their shares go parabolic, it’s too dangerous to take the short side on this name. Conversely, with much of the upside priced into shares, it’s probably not worthwhile to go long at today’s prices.
Shares could be an opportunity if they fall further, thanks to the potential value of the Sharecare investment. But otherwise, skip MARK stock for now.
Thomas Niel, contributor to InvestorPlace, has written single-stock analysis since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.