Thanks to Apps Like Robinhood, Buying MARK Stock Makes Little Sense

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Every once in awhile, I’m asked to cover a company that I’ve never written about. Today is one of those days. My friendly InvestorPlace editor has requested I provide my two cents on Remark Holdings (NASDAQ:MARK), a company that has had a very good year in the markets. MARK stock is up 358% year-to-date.

mark stock
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Curious why InvestorPlace readers were interested in this company, I went to some of my colleagues to get up to speed on Remark’s business. Is it really all that and a bag of chips?

Here’s what Laura Hoy had to say recently:

“It’s not hard to connect the dots between investors’ enthusiasm for Remark and the firm’s thermal screening capabilities. The novel coronavirus has rocked economies around the world and as they reopen without a vaccine, there are a lot of questions regarding how communities will keep the virus under control,” Hoy stated on June 12.  

“Remark’s thermal-screening technology is exactly the kind of thing that will allow businesses to function even if the coronavirus is still a threat. That’s because its AI-enhanced technology allows for quick, accurate scanning. That could be a game-changer for companies that deal with large groups, like airlines.”

It’s clear there is a demand for the company’s product, at the moment. The only way Remark generates sustainable growth is if the world’s governments make these products mandatory at all large venues and mass gatherings. 

It could happen. Hence the price movement. 

Is MARK Stock the Best Option?

InvestorPlace contributor Louis Navellier rates MARK a “strong buy.” Navellier’s a veteran investor, so his endorsement speaks volumes about the stock’s potential.

Hoy, who I quoted earlier, believes it is riding a couple of big trends: thermal technology and digital healthcare, which makes the risk to potential reward worth it for investors holding a diversified portfolio. 

Hoy’s been around the block once or twice. She has an excellent grasp of winners and losers. If she thinks it’s got a shot at greatness, who’s to argue? 

That said, let’s consider Remark’s current situation.

In 2019, it had sales of $5 million, down from $10.1 million a year earlier. The company’s sales fell by 50% primarily because it exited its fintech services business in 2018. However, it also saw a $700,000 decline in artificial intelligence revenues in 2019, the area my colleagues believe has all the upside. 

To be fair, Remark did enter into a partnership in 2019 with Hanvon Technology to transform China Mobile’s (NYSE:CHL) 17,800 stores into smart retail stores. Phase one of the partnership is worth $50 million to the company over three years.

On June 1, Remark announced that the company’s partnership with Hanvon won the phase two implementation of the smart stores for China Mobile. The contract is said to be worth several million dollars, although no specific numbers were given.      

If everything goes as planned, Remark could have $50 million to $60 million cash on its balance sheet at some point over the next three years. 

The only problem is that life usually doesn’t go perfectly. A lot can happen between now and then. But, let’s assume sales for this partnership generate $15 million in 2020, $17.5 million in 2021, and $17.5 million in 2022. Let’s also assume that it generates an additional 25% on top of these sales from other thermal imaging and artificial intelligence projects. 

Based on these estimates, it would have sales of $18.75 million in 2020 and $21.88 million in 2021 and 2022. Currently, it has 99.4 million shares outstanding for a market capitalization of  $232.6 million. Assuming 2021 sales of $21.88 million, it has a forward price-to-sales ratio of 10.6x.

According to Finviz.com, there are 194 technology companies (market cap greater than $2 billion) with a current P/S under 10. Names like Apple (NASDAQ:AAPL), Salesforce.com (NYSE:CRM), and Advanced Micro Devices (NASDAQ:AMD).

Robinhood Makes MARK a Bad Bet

Forget Remark’s potential for a minute and consider that it is going to lose money for the foreseeable future. It lost $22.8 million in 2019 from $5 million in sales, $44.5 million from $10.1 million in 2018. 

Yet, investors are willing to expose themselves to multiple risks (trade war, failure to execute business model, overvalued, etc.) merely because it trades under $2.50? That’s just nuts. 

That’s because you could take a 1,000-share bet on Remark and turn that into a 6.55-share bet on Apple by using Robinhood or one of the other platforms that offer fractional shares. 

I’m sorry, but unless you can afford to be that cavalier with your hard-earned capital, it makes no sense to make a bet on Remark at this point in its development. 

Oh, and if you’re like me, and don’t like to invest in companies with a little scandal attached to them, consider that one of Remark’s directors is Brett Ratner. He’s the Hollywood producer who has spent a lot of time in the media in recent years for all the wrong reasons.  

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


Article printed from InvestorPlace Media, https://investorplace.com/2020/06/thanks-to-sites-like-robinhood-buying-mark-stock-makes-little-sense/.

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