Remark Holdings (NASDAQ:MARK) stock has had an up-and-down history. The shares shot up from $2 to $8 in 2014. And they spiked from $3 to $12 in 2018 before sinking back again. By early this year, the stock was trading for less than 50 cents. The company was nearly out of cash, and its options seemed limited.
Then the novel coronavirus hit and rejuvenated the company. Remark is currently focusing on cameras powered by artificial intelligence. The company has developed cameras that allow large public venues, such as casinos and stadiums, to perform thermal temperature readings of people, helping to reduce the risk of virus infections. Traders have gravitated to the story, with the company’s stock surging as much as tenfold in recent weeks.
A Remarkable Transition
Remark has been in several different businesses in recent years. At one point, it owned major domain names such as Vegas.com which it used to sell tickets and other related products. A few years ago, it focused more on its investment in KanKan, a Chinese artificial-intelligence platform. For awhile, KanKan appeared to be successfully using AI to improve processes such as credit checks. But it ultimately fizzled out following a crackdown by the Chinese government on financial technology.
Now Remark is focusing on its enhanced digital –thermal cameras. That was a logical decision, and it’s particularly compelling in light of the coronavirus. Even though the acute phase of the virus has likely passed, Covid-19 is not going away overnight.
As a consequence, preventative measures will be needed to bring back normalcy. And products such as Remark’s thermal technology could be a key means of making large concerts, conferences, and cruises possible again. So there could be a huge market for the cameras.
A Limited Balance Sheet and a Potential IPO
At the end of 2019, Remark had just $272,000 of cash, and it had tens of millions of dollars of liabilities. As a result, its stock price plunged deep into penny-stock territory, as investors feared that it would soon become insolvent.
After the move to smart cameras, Remark’s financial position has improved. That’s because it can now access the capital markets on reasonable terms again. Still, its balance sheet is a major concern, as it will take significant funds to get its AI-camera business rolling.
That said, most companies trading around $2 per share have some financial problems. Unlike many penny stocks, however, Remark potentially has an ace up its sleeve. Its ace comes in the form of its 4.5% ownership in Sharecare. Sharecare is a health and wellness platform. It’s racked up multiple celebrity backers, including Oprah Winfrey and Dr. Oz.
Reportedly, Sharecare may try to launch an initial public offering in the near future. That, in turn, might allow Remark to monetize a significant chunk of its holding and free up much-needed cash that it can use to back its other lines of business. The company’s stake in Sharecare could be worth tens of millions of dollars.
Remark’s Uneven Operating History
Remark has a spotty track record. It has tried to commercialize a number of different technologies and lines of business. As a result, it has generated significant revenues in recent years, but it has not had meaningful operating profits.
Arguably the company’s peak was in 2017, when it produced revenue of more than $70 million. That’s a hefty sum for a company of Remark’s size. Unfortunately, it lost more than $20 million that year. Subsequently, it sharply curtailed its operations; Remark only brought in $5 million of revenues last year.
So the latest pivot to cameras could be positive. But make no mistake, Remark has had its fair share of struggles in the past. Investors should factor that in, as it indicates that MARK stock poses a high degree of risk. Its management will have to do many things right to go from having a cool product to producing strong, recurring profits.
My Verdict on MARK Stock
Given Remark’s warning signs, I personally wouldn’t invest in Remark. That said, it has some compelling features. But investors should treat it as a highly speculative holding that could easily go bust.
The company’s finances, in particular, leave a lot to be desired. Any monetization of its Sharecare stake would also be a gigantic win for the company.
the other hand, it’s unfortunate that Remark’s key assets are in China. That’s a huge sticking point, given the current state of geopolitics. When even gigantic Chinese firms like Huawei have trouble getting their products to market, it’s likely that the U.S. won’t look fondly on surveillance or monitoring products that are made in China.
But Remark has a lot more going for it than most of the other Covid-19 stocks that are popular with traders. It has generated significant revenues in the past, and its stake in Sharecare could be quite valuable.
Consequently, Remark should have more longevity than many of the other virus stocks. Still, be careful with it because a lot could go wrong for it. MARK stock is an interesting investment, but it carries a ton of risk.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he held no positions in any of the aforementioned securities.